Rethinking the Public-Private Mix in

Higher Education
Rethinking the Public-Private Mix in
Higher Education
Global Trends and National Policy Challenges

Pedro Teixeira, Sunwoong Kim, Pablo Landoni and Zulfiqar Gilani

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 TABLE OF CONTENTS

List of Tables vii

List of Figures ix

Introductionxi
Pedro Teixeira, Sunwoong Kim, Pablo Landoni and Zulfiqar Gilani

Part I: The Changing Public-Private Mix in Higher Education: A Global

Approach to a Global Issue

1. Private Higher Education: A Long History and a Recent Expansion 3

Pedro Teixeira

2. The Rise of Private Higher Education: Patterns of Development and

Regulatory Challenges 21
Pedro Teixeira and Pablo Landoni

3. Understanding the Public-Private Mix of Higher Education: A Proposal

for an Analytical Framework 35
Sunwoong Kim

Part II: Changing Public-Private Mix in Higher Education: National and

Regional Trends in a Comparative Perspective

4. Public-Private Mix in Higher Education in Pakistan: An Overview 61

Zulfiqar Gilani

5. Regulatory Changes and the Public-Private Mix in Portuguese Higher

Education83
Pedro Teixeira

6. Public-Private Mix of Higher Education in South Korea 107

Sunwoong Kim

7. Diversification and Isomorphism: New Dynamics in Uruguay’s Higher

Education System 141
Pablo Landoni

v
TABLE OF CONTENTS

Part III: Conclusion

8. Changing the Public-Private Mix in Higher Education: Global Trends

and National Challenges 165
Pedro Teixeira, Sunwoong Kim, Zulfiqar Gilani and Pablo Landoni

References177

vi
 LIST OF TABLES

Table 1.1. Tertiary education students enrolled by type of institution

(2012)10
Table 1.2. Population having attained tertiary education in OECD
countries (%) (2013) 13
Table 1.3. Earnings of the population with tertiary education relative to
upper secondary and post-secondary non-tertiary education
(= 100) – 2014 15
Table 1.4. Main features in development of private and public higher
education provision in a global scale 18
Table 4.1. Full-time faculty members classified by academic qualification 69
Table 4.2. Chartered universities and degree awarding institutions in the
public and private sectors: Temporal and provincial breakdown 69
Table 4.3. Number of students in higher education institutions by area &
sector76
Table 4.4. Province and city-wise distribution of Higher Education
Institutions (HEIs) 77
Table 4.5. Development expenditure on education in five year plans
(Rupees in billions) 79
Table 5.1. Level of literacy and degree completion of the Portuguese
population (% of population 15–64 yrs.) 85
Table 5.2. Summary of estimates of rates of return to schooling in
Portugal (%) 91
Table 5.3. Growth of enrolments, total and by sub-sector 99
Table 5.4. Distribution of enrolments by level of schooling of the
household (%) 103
Table 5.5. Enrolments by level of household income, 2004 104
Table 6.1. Number of Universities and Junior Colleges in Korea,
1952–2012111
Table 6.2. Enrolment in universities and junior colleges in Korea,
1952–2012112
Table 6.3. Spending on tertiary education as % of GDP in OECD
countries, 2010 113
Table 6.4. Per student expenditure in tertiary and secondary education in
selected countries (2004) 120
Table 6.5. Student-faculty ratio 122
Table 6.6. Key statistics on universities teaching staff and Korean
doctoral degree holders 123

vii
LIST OF TABLES

Table 6.7. Number of Korean students in the U.S., 1993/94–2012/13

Institute of International Education 125
Table 6.8. Percentage of students who receive scholarship 131
Table 6.9. Average amount of scholarship per student (unit: 1,000
Korean won, 1 US $ = 1,000 won) 131
Table 7.1. Evolution of private institutions (1995–2010) 144
Table 7.2. Percentage of enrolments by field of study, by sector 156
Table 7.3. Faculty positions by type of contract and sector 157

viii
 LIST OF FIGURES

Figure 3.1. CDFE model in a diagram 36

Figure 4.1. Expansion in higher education institutions 70
Figure 6.1. Number of 20 year olds (1960–2010 Actual, 2010–2060
Estimated)118
Figure 6.2. Enrolment in higher education institutions, 1965–2012 119
Figure 6.3. Student admission score and per student expenditure in
Korean higher education institutions 129
Figure 6.4. Student admission score and cost to a student in
Korean higher education institutions 130
Figure 7.1. Percentage of private enrolments, 1995–2010 145
Figure 7.2. Percentage of private graduates, 1995–2010 146
Figure 7.3. Academic program development in the private sector 153
Figure 7.4. Program development and number of students per program 154
Figure 7.5. Number of master and doctoral programs by sector 155

ix
 PEDRO TEIXEIRA, SUNWOONG KIM, PABLO LANDONI AND
ZULFIQAR GILANI

INTRODUCTION

By the mid-twentieth century, private institutions were non-existent in most

countries, and even where they existed, their relative size was much smaller than
those in the public sector. This situation has been changing rapidly and significantly
in recent decades, with the emergence of private higher education as a global reality.
In the last decades, higher education has been experiencing a notable growth in the
private sector worldwide (Altbach, 1999). This phenomenon has been especially
evident in Latin America, Africa, Asia, and even in some parts of Europe, where
increasing numbers of students willing to access higher education are creating stress
upon traditional public universities.
There are several important reasons for this global expansion of private higher
education. One the one hand, there are questions of necessity due to the challenges
faced by governments to finance higher education. On the other hand, there are
important regulatory changes about the way higher education systems should be
organised and managed that have fostered a greater role for private providers.
Although there are specific reasons for the emergence of private higher education in
each specific system, there is, as well, a significant degree of commonalities in the
context and purposes surrounding the emergence of private higher education as an
important actor in many systems of higher education.
Private institutions have been performing different roles as competitors in more
open systems. Mostly they have facilitated access to higher education, accommodating
students who are not able or willing to study in the public sector HEIs. In several
countries, private institutions have played a relevant role in massification – attracting
new students with almost no cost to the public purse. Yet, concerns often arise over
the quality of programme provision by private institutions, bolstering demands for
government action in terms of quality assurance. In several countries, especially
low-income ones, expansion of the private sector has also raised concerns for equity
and access since full-tuition private institutions were once regarded as clearly being
beyond the economic potential of many families. Thus, the ascent of private higher
education has created important policy challenges.
One of the major issues in higher education policy and in the role of the private
sector is that of funding. As the costs of HE increase rapidly, a key issue is how
HE should be funded. Because of financial limitations, many governments find it
difficult to meet the demand for expanding welfare programmes and are reluctant

xi
P. TEIXEIRA ET AL.

or unwilling to spend meagre public resources on higher education. Another critical

issue is regulation. In the complex scenario of a rapidly expanding and diversifying
higher education sector, government intervention through regulation needs to be
reassessed and adapted. Related to regulation is the major issue of quality, which
has received greater attention with the massive development of the private higher
education sector. Finally, there are important debates about access and equity, as
well as the contribution of an expanding private sector in this respect.
The rise of private higher education around the world has created new problems,
but in most cases, it has also highlighted traditional major issues in higher education
policy. Although in some countries, the rise of the private sector has contributed to
exacerbating old problems such as ones of quality and equity, in other countries,
it has contributed to alleviating some significant difficulties like access and the
financial resources required to expand the system. Thus, this strengthens the view
that not only should private higher education be regarded as a major priority in
higher education policy agenda, but also that it should be regarded as a part of the
system that can be used to help it better perform its missions.
The overall goal of this volume is to provide a framework for a better understanding
of the public–private mix of higher education and a set of policy guidelines for dealing
with the expansion of private higher education from a comparative perspective.
Specifically, the volume attempts to:
1. Examine the context of the development of private higher education globally,
regionally, and nationally;
2. Investigate and analyse trends, factors and dimensions fuelling the rise of private
higher education using a comparative perspective;
3. Analyse the issues and challenges facing both public and private higher
education institutions in the performance of their functions, using a comparative
perspective.
The historical development of private higher education has been a complex process
that is of great relevance to understanding the contemporary differences in the
public–private mix around the globe. Whereas by the mid-twentieth century, private
institutions were absent from most countries worldwide (and even when they existed,
their relative size was small in comparison to the public sector), in recent decades
this has changed significantly, leading to the current relevance of the private sector
in many higher education systems around the world. Thus, in Chapter 1, the main
historical trends in the development of private higher education and the major forces
that help to understand how its relevance has changed so visibly in recent decades
are discussed.
The rapid increase in recent years of private higher education has posed
important policy challenges, since in most countries, this was largely unplanned and
unanticipated by governments and regulatory bodies. Thus, in Chapter 2, the main
patterns associated with in the development of private higher education in recent
decades and the major policy issues associated with that process are discussed.

xii
 INTRODUCTION

Despite significant changes in higher education as a whole and the rapid

expansion of private higher education, governments continue their role in regulating
the sector. They attempt to determine the main goals of the higher education system,
assure the existence of quality mechanisms, promote fair and equitable access, and
stimulate the efficiency of the system. In recent decades, changes have occurred
in the instruments and mechanisms used by governments to achieve those ends.
However, new policy approaches are required that could address such a diverse
and complex system, which may be beyond the traditional bureaucratic methods.
Therefore, in Chapter 3, a unified and coherent, but flexible, theoretical framework
that may be applied in different countries and diverse systems is proposed. The
proposed theoretical framework has three interrelated components, namely the
context (C) in which private higher education has emerged, the dimensions (D) for
the analysis of private higher education, and the functions or missions (F) of private
higher education. Additionally, it is important to be able to evaluate the higher
education system using a set of universal criteria.
This analytical framework will constitute the basis for the second part of the
volume, which presents four case studies of countries from different regions. The
countries analysed are: Pakistan, Portugal, South Korea and Uruguay. These four
cases, which are analysed in individual chapters (4–7), illustrate the diversity of
contexts in which the development of private higher education has been found in
recent decades. However, these chapters also highlight some important commonalities
regarding the role of policy makers in dealing effectively with the emerging private
reality in higher education.
Each country may be faced with a very different set of policy issues and socio-
economic and political situations therefore, the choices available to policy makers
may also be very different. However, there is a set of commonalities in the way
that this recent emergence of private higher education may be approached by policy
makers. Thus, in the final chapter, we try to identify some common issues and trends
in the variety of national experiences in the development of private higher education.
Based on that analysis, we present some general recommendations that, according to
our view, may help to build a more effective policy framework that takes advantage
of the private sector in order to better fulfil the missions of higher education.

AFTERWORD – TEN YEARS IN THE MAKING AND STILL IN PROGRESS!

The origins of this book date back a decade when the authors met as Fulbright New
Century Scholars for the 2005–2006 academic year. This group, coordinated by
Prof. Philip Altbach, assembled 30 scholars from around the world with a strong
interest in higher education. This proved to be a wonderful experience that set the
roots for a lively network of researchers working on higher education topics around
the world that continues to nurture joint initiatives. The authors of this volume
were placed in a specialised group focused on the changing dynamics of public
and private higher education worldwide (together with two other colleagues whose

xiii
P. TEIXEIRA ET AL.

professional commitments prevented them from further pursuing this collaboration).

During that year, the authors met a few times and were in close contact to develop
what has become the first basis of this volume (for an initial synthesis, see Kim et al.,
2008). Moreover, two of the authors (Landoni & Teixeira) benefited from spending
a few months each at SUNY-Albany, where a major network of researchers working
on private higher education around the world had been launched and coordinated by
Prof. Daniel Levy, one of the leading experts worldwide on private higher education.
It soon became clear that the work could be fully developed into a single volume
exploring, in more detail, the historical origins of the current public–private mix, the
policy challenges raised by the recent development of private higher education, and
an analytical model that could then be illustrated by taking into account the diverse
origins of the group. The first draft of the book was ready by the end of the decade,
but multiple professional commitments have delayed its revision and publication.
Finally, we decided that we should make an extra effort to finish this rewarding
collective adventure and over the last year, we revised the draft thoroughly, most
notably by significantly updating the country case studies, according to the dynamics
of the private sector. Overall, we are quite happy that it was possible to complete this
volume, though we are aware that the purpose that led to us working together will
continue to evolve. Nevertheless, the intellectual and personal bonds nurtured during
these 10 years will certainly be an encouragement to further pursue this common
interest in the future.

xiv
 PART I
THE CHANGING PUBLIC-PRIVATE MIX IN
HIGHER EDUCATION
A Global Approach to a Global Issue
 PEDRO TEIXEIRA

1. PRIVATE HIGHER EDUCATION

A Long History and a Recent Expansion

1. INTRODUCTION1

The historical evolution of private higher education is a complex process that

highlights important changes in the political, legal, and social structure. During
this process, the concepts of public and private have evolved, moulding the
understanding of what could be considered private and public higher education.
Hence, private higher education can be considered a very old reality or a much more
recent one, depending on the perspective adopted. The view that regards private
higher education as a long-standing reality highlights the fact that many of the
earliest universities were the result of non-governmental initiatives that took place
in Western Europe during the second half of the middle Ages. Even when founded
by royal or papal decree, these were normally set as autonomous institutions from a
material and organisational point of view.
However, these first universities were not private in the same way we now
understand them. They had been set with a public orientation that made them
accountable to religious and secular authorities in a way that would not necessarily fit
into what is presently the norm in private higher education. The separation between
the public and private sphere was far less clear in the medieval times, especially
between the European monarchies and the Catholic Church. Thus, the dichotomy
between public and private higher education was, in some respects, also less clear
than today.
On the other hand, private institutions today are also accountable to public
authorities since they tend to face the same regulation and regulatory bodies as do
public ones. In fact, the more we advance in the history of higher education, the
more pronounced the role of public authorities becomes (see Hammerstein, 1996;
Gerbod, 2004). This reached a height in the nineteenth and early twentieth centuries,
when the modern state explicitly expanded its functions to include higher education
under its wings, in what Neave (2000) calls the “nationalisation” of higher education.
By the mid-twentieth century, private institutions were absent from most countries
worldwide and even when they existed, their relative size was small in comparison
to the public sector.
In this chapter, we trace the most significant aspects of this complex historical
evolution in order to understand how public provision came to dominate higher

3
P. Teixeira

education. We give particular importance to the way European models have

influenced the development of higher education elsewhere, though we also highlight
regional differences. Many of these are relevant to understanding the differences in
the public–private mix that has persisted until contemporary times.

2. EUROPEAN LEGACY AND PUBLIC HEGEMONY

One of the major forces that contributed to the small role that, until the late twentieth
century, private forces played in higher education has to do with its European origins.
The way educational needs were provided in Europe would be determinant not only
for higher education on that continent, but also worldwide since most universities
were modelled to reflect their European forerunners. The first universities were
established in Medieval Europe in the end of the eleventh century and then grew
significantly during the following centuries under the patronage of the secular and
religious authorities. This support was important for various reasons, not the least
being the material ones, since these tended to be vital for universities’ subsistence
and survival.
This involvement of national and local authorities grew and strengthened
universities’ roles in training local and national secular elites. At the same time,
the more the modern State, emerging from the late 1600s, regarded the university
as a supplier of qualified labour, which grew its appetite to increase the level of
control over university life (see Neave, 2001). Higher education institutions were
increasingly regarded as an instrument for training elites, this increasing the perceived
usefulness of this form of education. In order to train the new members of the
administration, European states, especially in Continental Europe, started to either
establish institutions or to more visibly regulate the already existing institutions.
This was vividly illustrated by the tensions with the Jesuit order throughout the
eighteenth century, whose prominence in educational institutions at that time put
them on a collision course with public authorities and contributed to their expulsion
from many European countries.
Thus, the turn of the nineteenth century saw an emergence of a growing
state bureaucracy aimed at regulating, to a significant degree, the universities’
organisation, syllabus, teaching staff, and student recruitment. Nowhere was this
process taken further than in France, with the emergence of the so-called Napoleonic
University model, referring to State involvement in steering its specialised higher
education institution, which was considered to have an important role to play in the
modernisation of society, as well as in nation building (Neave & van Vught, 1994).
The Napoleonic model was to have a lasting influence in many European countries,
and its influence would extend beyond Europe, notably to Latin America (via the
colonial influence of Portugal and Spain). At the same time, the so-called Prussian or
Humboldtian University model, although established in the early 1800s against the
Napoleonic model from the perspective of protecting academic freedom, presented
a new pattern of the State’s strong administrative influence over university life. In

4
 Private higher education

some cases, this steady process of persistent state control over universities started to
be reversed at the end of the twentieth century.
The new type of relationship between universities and the State that emerged
in the nineteenth century and largely persisted throughout most of the twentieth
century forged a new and strong state of dependence of universities towards secular
authorities (see Wittrock, 1993). This dependence, particularly noticeable in Europe,
was visible at the financial, administrative, educational, and political levels. The
growing role of the government in funding universities was encompassed by a
much greater administrative oversight of the former. One of the most visible signs
was the slow but steady establishment of Ministries of Education or similar public
administrative structures that would develop a detailed control of university life.
In Continental Europe, this had already taken place throughout the nineteenth
century, whereas in Britain, it was more gradual, being accomplished after World
War II. Universities became increasingly accountable to state authorities and had
to ask for governmental authorisation for a wide set of organisational procedures,
which in the mid-twentieth century, became the so-called model of rational planning
and control (Van Vught, 1989). This reached a height in the post-World War II
decades with so-called legal homogeneity (Neave & Van Vught, 1991), meaning
that governments defined a standard curriculum and syllabus for each institution that
was aimed at providing higher training in a specific field. These developments were
particularly pronounced in Continental Europe.
In addition to national equality, this strong governmental regulation of higher
education training envisaged to ensure that universities provided the training that
governmental officials deemed more appropriate, especially bearing in mind the
future role of university graduates within public administration (Neave, 2001). The
growing influence of governments in higher education was significantly shaped by
the development of modern administrative and political structures (Middleton, 1997).
The expansion of government’s economic and social roles, especially after World
War II created significant needs for qualified personnel that would be provided by
higher education. This demand for some types of qualified individuals was already
present in the nineteenth century, especially regarding those with some type of legal
training as well as some engineers. However, the post-war expansion of the state,
especially with the construction of the so-called Welfare State, required governments
to hire an enormous number of highly qualified people, such as teachers, social
workers, doctors, nurses and accountants (plus an added number of the well-established
professions of lawyers and engineers). The post-war times of macroeconomic demand
management also enhanced the governmental demand for individuals with economic
training. Governments became the major employer for many of these careers and
therefore were increasingly interested in adjusting the training provided by higher
education, either in the syllabus or even in the type of programmes available, to the
needs of the increasingly expanding governmental structures.
This expansion of the governments’ role in higher education was itself part and
parcel of the post-war expansion of the State, which was particularly visible in

5
P. Teixeira

Western countries. The post-war expansion in governments’ expenditures in public

education clearly went beyond merely encompassing the rising number of students.
It corresponded to a growing willingness to support education, eventually turning it
into a political and budgetary priority (Gosden, 1983). World War II was a kind of
turning point, showing the importance of a pool of skilled labour and the potential
achievements of scientific research for military, economic, and social life. Higher
education, therefore, became a major concern for many governments (Wittrock,
1996). These multiple and complex expectations fuelled a steady and rapid expansion
of public higher education in the second half of the twentieth century, leading to the
emergence of mass higher education in North America, Japan and finally in Western
Europe.
By the early twentieth century, there were very few universities outside Europe
and the Americas. Although higher learning has a long history in the Arab and Islamic
world, there were very few higher education institutions in the Middle East by the
mid-twentieth century, aside from Islamic seminaries. The situation in Africa was
similar. In North Africa, there were very old and important theological institutions
of advanced learning, but secular higher education only appeared in the nineteenth
century with the emergence of some colleges and separate faculties. The first North
African universities were only established in the twentieth century, while in most of
Sub-Saharan Africa’s first higher education institutions were founded very recently,
mostly after independence was gained in the post-World War II decades. In Asia,
the first western style universities date back to the mid-nineteenth century. In the
nineteenth and the twentieth centuries, learning and diffusion of Western science
were linked to the idea of Western culture (Altbach & Umakoshi, 2004).
The dissemination of university-like institutions outside Europe was linked to
the European influence around the world. Even in the twentieth century, universities
were often deeply modelled after those existing in Europe (Neave, 2000), as the
authorities, frequently products of the European universities themselves, tended to
replicate those institutional structures (Neave & van Vught, 1994). The influence of
European university models was, in some cases, indirect, when certain organisational
types of higher learning institutions, originally modelled from European patterns,
absorbed other influences and characteristics under the influence of local needs and
local elites. This was already the case in North and South America in the nineteenth
century.
Whereas Latin America was more inclined to follow European trends (regarding
the role of the State in higher education), differences emerged in North America. In
this case, the increasing involvement of local elites in higher education contributed
decisively to producing institutions that were much more diverse and more oriented
towards their external environment. In North America, the development of a
federal state and its limited role in higher education also contributed to increasing
divergence with Europe and Latin America, as the lower level of centralisation
prevented the Federal government from having the legal and financial resources
(as well as the political legitimacy) to support a strong intervention in higher

6
 Private higher education

education. These developments eventually led to an emergence of a different,

“North American” higher education institution, which would be imitated in other
parts of the world.

3. THE WORLDWIDE EXPANSION OF THE PRIVATE

HIGHER EDUCATION SECTOR

Both inside and outside Europe, the earliest universities became increasingly under
the influence of governments, although many of them were first established as
autonomous institutions. This was also the case with the many religiously affiliated
institutions that were prominent particularly in southern Europe and Latin America.
These institutions were increasingly supervised by secular authorities, either due to
the growing share of public funding or their actual transfer to the public domain.
Hence, by the early twentieth century, not only was the number of universities still
small, especially outside Europe and North America, but also the number of private
institutions was even less significant.
By the end of the twentieth century, many higher education systems included some
type of private higher education institution. Thus, even though in the early twentieth
century, the existence of private higher education institutions was rather uncommon,
they increasingly became part of the higher education landscape throughout the last
century, especially during its last quarter. For a significant number of countries, the
first private institutions to emerge were still nurtured by the traditional role that
religion had played in higher education. Although secularisation and the growth of
the modern state since the eighteenth century had created a much less favourable
environment for religiously affiliated institutions, in many countries the first private
institutions were established by the Churches, especially Catholic ones, in the late
nineteenth and early twentieth centuries.
The role of religion was particularly important in the Americas. In Latin America,
the so-called first modern wave of private universities prior to the nineteenth century
was clearly dominated by the Catholic Church (Levy, 1986). However, with the
ascent of the modern State, most of these universities were eventually taken over by
the State and during the nineteenth century, higher education became almost a state
monopoly. Yet, the 1920s and 1930s saw a slow but visible resurgence of Catholic
universities in several Latin American countries, namely, Colombia, Chile, Bolivia
and Peru. This new set of private Catholic Universities established throughout Latin
America was often regarded as a way of fighting against growing secularisation of
societies and an attempt of the Catholic Church to retain some of its prior social and
political influence.
In North America, the role of religion was also very important for the establishment
of the first private higher education institutions. Many of the institutions established
in the colonial period and thereafter had strong links with the various protestant
denominations (Thelin, 2004). The first institution was a college established in 1636
by the Massachusetts General Court, renamed Harvard College three years later

7
P. Teixeira

as in honour of a generous donor, John Harvard. In 1650, it was chartered by the

General Court.
The religious dimension was not only clearly present in the motivations for its
establishment, but also in the frequent controversies upon the degree of compliance
of its faculty, and especially its administration, to religious orthodoxy. The
establishment of Harvard was followed by a series of colleges created along the
east coast of the United States.2 In the Canadian provinces, no higher education
institutions were established until the end of the eighteenth century, except for a
seminary in Quebec and a few grammar schools (Roberts et al., 1996).
Religion lost significant ground in higher education by the nineteenth century.
Although many colleges were still sponsored on a private denominational basis,
they had developed a system of lay government (Hofstadter, 1996) where trustees
held fiduciary control of the institution. Moreover, many of the private institutions
established in North America had a much less confessional tone in the twentieth
century, even if they often were a product of fervent religious individuals.
In other parts of the world, private higher education was clearly a product of the
twentieth century, following the later development of higher education as a whole.
The first private higher education institutions in the Middle East were only established
in the mid-nineteenth century. Throughout the twentieth century, especially after
the independence of former colonies, almost all new universities were established
as public universities in many Arab countries, according to a widespread belief
that higher education was a state responsibility. Higher education was regarded, as
in many other parts of the world, as an instrument for training elites, especially
with regard to the senior ranks of civil service and public administration. Private
higher education institutions either were not allowed to continue to function or were
prevented from being established. The trend of public sector dominance continued
until the 1980s and 1990s, when the emergence of massive growth in the demand
for higher education strained the states’ ability to meet it (UNESCO/OECD, 2006).
For example, between 1995 and 2003, the participation rate almost tripled in Egypt
and almost doubled in Jordan. This led to the re-emergence and rapid increase of
private universities and institutions.
The development of private higher education in Africa also followed the lagged
development of its overall higher education structures. The number of universities
in Sub-Saharan Africa was minimal until the mid-twentieth century. The British
imperial achievements in Africa were very limited in what concerns higher education
and the only exception was South Africa with the establishment of the University
of Cape of Good Hope in 1873, followed by a couple others at the beginning of
the twentieth century. In the French colonies in Africa, the efforts were even more
limited. Hence, most private higher education institutions in Africa are a recent
development, mainly dating back to the 1990s. The emergence of the private higher
education sector seems to have benefited from the slow development of the public
sector and the financial constraints of many African governments, which prevents
them from keeping pace with the growing demands for higher education. This has

8
 Private higher education

been illustrated by explosive expansions of enrolments in countries such as Kenya,

Uganda or Zimbabwe, especially since the 1980s (Neave & Van Vught, 1994;
UNESCO/OECD, 2006). However, to a certain extent, widespread poverty has
hindered the development of the private sector in many African countries.
In Asia, where western-style higher education systems developed in the nineteenth
century, private higher education became a significant feature of systems from an
early stage. In many Asian countries, private higher education came to attain a very
prominent role throughout the twentieth century, in contrast with other parts of the
world (Shils & Roberts, 2004). The Philippines, the first Asian country to have a
university inspired by Western models, was also a pioneer in Asia with regards to
private higher education with the establishment of a for-profit institution – the Far
Eastern University, first established as the Institute of Accountancy in 1928 (and
attaining university status in 1934).
In both China and Japan, private higher education developed quite early. The
first private institutions were established in these countries near the beginning of the
twentieth century, quickly following the establishment of their public counterparts
in the last decades of the nineteenth century. Thus, by 1949, around 40% of the 205
universities and colleges existing in China were private, with a significant proportion
of them based on prior missionary colleges founded under European and American
influence (Min, 2004). Japan also developed a tradition of private universities, with
several of them being created in the second half of the nineteenth century. The private
sector also expanded rapidly in other Asian countries, though in some countries,
such as Vietnam and Malaysia, their role was small or non-existent until recently.
Private higher education is therefore not a new development in a number of Asian
countries and this sector often represents more than half of the total higher education
enrolment, as in the cases of Japan, South Korea and the Philippines. Some of these
private higher education institutions are very prestigious.3
With regards to most OECD countries, we observe that for a long time, Europe
remained a bastion of public dominance in higher education, with a large majority of
higher education students still being enrolled in public higher education institutions
in most European countries today (see Table 1.1 below). Even those confessional
institutions that survived until modern times in Europe were assimilated into the
public sector during the twentieth century, often through financial mechanisms.
This was, for example, the case with several institutions in The Netherlands and
Belgium. Although these institutions were nominally private, they were funded and
supervised the same as any other public universities in the same system, being
considered mainly as government-dependent private institutions. This means that
a private entity has control over the institution, but the institution receives 50%
or more of its core funding from governmental sources or a government agency
pays its teaching personnel. Thus, the existence of private institutions remained
minimal in most of the Western European higher education systems, despite the
increasing willingness of governments to adopt market-like mechanisms (Teixeira
et al., 2004).

9
P. Teixeira

Table 1.1. Tertiary education students enrolled by type of institution (2012)

Tertiary-type B education Tertiary-type A and advanced

research programmes

Government-

Government-
Independent

Independent
dependent

dependent
private

private

private

private
Public

Public
OECD
Australia 71.7 20.3 8.0 95.4 0.0 4.6
Austria 73.5 26.5 0.0 84.3 15.7 0.0
Belgium 41.8 58.2 0.0 43.5 56.5 0.0
Canada 100.0 0.0 0.0 100.0 0.0 0.0
Chile 3.9 2.3 93.8 25.1 19.9 55.0
Czech Republic 73.0 26.7 0.3 86.9 0.0 13.1
Denmark 96.7 2.8 0.6 98.0 2.0 0.0
Estonia 55.7 20.5 23.8 0.4 94.3 5.3
Finland 100.0 0.0 0.0 74.2 25.8 0.0
France 69.0 10.1 21.0 83.1 0.8 16.1
Germany 100.0 0.0 0.0 100.0 0.0 0.0
Greece 100.0 0.0 0.0 100.0 0.0 0.0
Hungary 49.2 50.8 0.0 87.2 12.8 0.0
Iceland 23.9 76.1 0.0 83.0 17.0 0.0
Ireland 99.6 0.0 0.4 97.3 0.0 2.7
Israel 30.4 69.6 0.0 10.3 75.1 14.6
Italy 87.6 0.0 12.4 90.6 0.0 9.4
Japan 7.8 0.0 92.2 24.6 0.0 75.4
Korea 2.1 0.0 97.9 24.7 0.0 75.3
Luxembourg 29.0 71.0 0.0 0.0 100.0 0.0
Mexico 95.8 0.0 4.2 67.2 0 .0 32.8
Netherlands 10.1 0.0 89.9 88.2 0.0 11.8
New Zealand 56.6 39.9 3.4 96.3 3.5 0.2
Norway 41.9 31.9 26.2 85.3 5.0 9.7
Poland 88.2 0.0 11.8 70.2 0.0 29.8
Portugal 100.0 0.0 0.0 79.8 0.0 20.2
Slovak Republic 74.9 25.1 0.0 81.9 0.0 18.1

10
 Private higher education

Table 1.1. (Continued)

Tertiary-type B education Tertiary-type A and advanced
research programmes

Government-

Government-
Independent

Independent
dependent

dependent
private

private

private

private
Public

Public
Slovenia 78.7 4.7 16.7 88.0 6.4 5.7
Spain 79.5 13.8 6.7 85.8 0.0 14.2
Sweden 53.6 46.4 0.0 93.7 6.3 0.0
Switzerland 31.4 32.1 36.5 95.0 3.2 1.7
Turkey 96.9 0.0 3.1 93.7 0.0 6.3
United Kingdom 0.0 100.0 0.0 0.0 100.0 0.0
United States 77.8 0.0 22.2 70.3 0.0 29.7
Other G20
Argentina 63.6 16.9 19.5 79.4 0.0 20.6
Brazil 14.9 0.0 85.1 30.6 0.0 69.4
Indonesia 42.9 0.0 57.1 31.7 0.0 68.3
Russia 95.4 0.0 4.6 84.4 0.0 15.6

Source: OECD Education Database (2014)

Table 1.1 shows that a surge of student enrolments in private higher education
institutions has occurred in the part of Europe where their establishment was
prevented for several decades. Since the collapse of the communist regimes at the
end of the twentieth century, private higher education has become a significant
feature of many higher education systems in Central and Eastern Europe (Wells
et al., 2007). In addition to these countries, the only European country in which a
large private sector has developed since the mid-1980s is Portugal, where roughly
one fourth of higher education students were enrolled in private institutions in 2012.
However, demographic patterns seem to be contributing to the slowing down of
demand in many of those countries, having severe negative effects on those private
sectors (Levy, 2013; Teixeira et al., 2013).
The data presented in Table 1.1 also reflect some of the aforementioned historic
patterns. They show the current relevance of private higher education in those
countries, in which private institutions were at the centre of the historic development
of the higher education sector. This is, for example, the case with the United States.
Moreover, the data also suggest that in those countries where the private sector
was an important part of the development of mass higher education, the former has

11
P. Teixeira

retained a very relevant role regarding enrolments. This is notably the case with
Asian countries like Korea and Japan, where private sectors represent the backbone
of the system, with independent private institutions enrolling roughly 80% of the
higher education student population. This significance of the private sector in terms
of student enrolments also remains very visible in many Latin American countries,
such as Mexico, Brazil and Chile, where independent private institutions enrolled a
large share of higher education students.

4. RATIONALES BEHIND THE RECENT EXPANSION OF

PRIVATE HIGHER EDUCATION

As we have seen, higher education has traditionally been strongly dominated by

public provision and government regulation, especially in Europe. This has been
influenced by the parallel evolution of the modern State and its growing interplay
with the universities’ missions. In this context, historically, the role of the private
sector in higher education remained modest until the last three decades, when
overall, the globe private higher education began to experience notable growth. This
phenomenon was especially visible in Central and Eastern Europe, Latin America
and Eastern Asia. While religion was an important driver behind the emergence of
the first private higher education institutions, especially in the Americas, its recent
massive growth has to be explained by a set of other contextual factors that have
shaped higher education worldwide in recent decades.
One of the major forces promoting the role of private higher education has been
the continuous and strong expansion of this sector globally, even in countries and
regions where, until recently, access to higher education was restricted to a very small
minority. Student numbers surged worldwide, fuelled by public policies and social
demand. At the policy level, governments have increasingly regarded the advanced
qualification of human resources as a key factor in promoting national economic
competitiveness. The recent economic discourse based on models of endogenous
growth has strengthened this view that the accumulation of human capital can improve
the economic prospects of a certain community (see Grubb & Lazerson, 2004).
In times of growing globalisation, the improvement of the qualification of human
resources has become one of the few factors through which governments can actually
contribute to enhancing national economic performance (Blöndal & Girouard, 2002).
The expansion of higher education is visible in Table 1.2. On average, there
are more tertiary graduates in the younger than in the older age groups in OECD
countries. This reflects the growing qualifications of their workforce. This pattern
has expanded beyond developed countries and has stimulated major expansions
of higher education enrolments in many developing countries. Whereas in OECD
countries, tertiary enrolment rose sharply in the last decades, in many developing
countries, the expansion was even larger. Data from UNESCO and OECD indicate
that the increase was even larger for developing countries from Latin America, Asia
and Africa.

12
 Private higher education

Table 1.2. Population having attained tertiary education in OECD countries (%) (2013)

25–64 30–34 25–34 35–44 45–54 55–64

OECD
Australia 41 49 47 45 37 33
Austria 20 26 23 22 19 17
Belgium 35 44 43 40 32 25
Canada 53 58 57 59 50 44
Chile 18 23 22 19 16 13
Czech Republic 19 26 28 19 18 13
Denmark 35 43 40 39 32 29
Estonia 37 39 40 36 37 35
Finland 40 46 40 47 41 31
France 31 44 43 38 24 20
Germany 28 32 29 30 28 26
Greece 27 31 35 27 24 20
Hungary 22 30 30 22 19 15
Iceland 35 40 38 42 34 25
Ireland 40 51 49 46 32 25
Israel 46 51 44 50 45 47
Italy 16 22 22 17 12 11
Japan 47 m 59 52 46 32
Korea 42 66 66 52 29 14
Luxembourg 39 50 50 45 32 26
Mexico 18 21 24 16 17 13
Netherlands 34 44 43 37 31 28
New Zealand 41 48 47 42 38 35
Norway 39 47 45 44 35 30
Poland 25 39 41 26 16 13
Portugal 19 27 28 20 14 11
Slovak Republic 19 24 27 17 16 14
Slovenia 26 39 35 30 23 17
Spain 32 40 39 39 28 19
Sweden 36 48 43 40 30 29
Switzerland 37 44 41 41 35 29

(Continued )

13
P. Teixeira

Table 1.2. (Continued)

25–64 30–34 25–34 35–44 45–54 55–64
Turkey 15 19 21 15 10 10
United Kingdom 41 50 48 45 37 33
United States 43 45 44 46 41 42

OECD average 32 40 39 35 29 24
OECD total (in thousands)
EU21 average 30 38 37 33 26 22

Partners
Brazil 13 15 14 13 13 10
Latvia 29 37 39 29 27 22
Russian Federation 53 56 57 55 52 49

Source: OECD (2014)

This expansion of higher education has also been significantly pushed by the
behaviour of individuals. A higher education degree has remained an attractive
personal investment, as shown by persistently high private rates of return that are
observable in many countries. For several decades, this has nurtured the view among
the General public that higher education graduates should expect enviable prospects
regarding long-term income and employability, especially when compared with
individuals with much lower levels of formal qualifications (see Mincer, 1993).
As Table 1.3 indicates, higher education graduates hold a significant income
premium over individuals with lower levels of educational qualifications. Despite
some national variations, this pattern holds true across different geographical
and economic contexts worldwide. The high rates of return on higher education
have been very important in fuelling demand in developing countries, where the
scarcity of qualified labour has tended to further enhance the premium for more
educated workers (Psacharopoulos & Patrinos, 2002). However, as we can see in
Table 1.3, the income advantage of more educated individuals has persisted even in
countries where there has been a significant and persistent expansion in the number
of individuals with a higher education degree. Altogether, this has contributed to
keeping the social demand for higher education very strong.
This persistent high demand has led to the so-called massification of higher
education, meaning not only growing rates of enrolment, but also more heterogeneous
and complex higher education systems. In order to respond adequately to an
increasingly diverse demand, higher education systems have developed new and
diverse programmes and institutions (Teichler, 1988; Taylor, 2008), thus, diversity
has become an increasingly important dimension in higher education policy. On
the other hand, massification also meant that it was no longer possible, or at least

14
 Table 1.3. Earnings of the population with tertiary education relative to upper secondary and
post-secondary non-tertiary education (= 100) – 2014

Below upper Post-secondary All tertiary

secondary non-tertiary education
education education
25–64 25–34 55–64 25–64 25–34 55–64 25–64 25–34 55–64
Gender (1) (2) (3) (4) (5) (6) (13) (14) (15)

OECD
OECD average Men 78 83 76 106 101 109 164 142 178
Women 75 77 70 107 98 111 162 151 168
Men + Women 78 83 73 108 102 110 159 140 176
EU21 average Men 80 84 79 106 97 111 166 142 179
Women 76 78 71 105 95 109 160 148 170
Men + Women 79 84 75 106 98 109 159 138 175

Source: OECD (2014)

15
Private higher education
P. Teixeira

advisable, for most governments to maintain a pattern of detailed regulation of

higher education institutions (Neave & van Vught, 1991). Hence, the governments
needed to explore new forms of steering that could be more effective within the new
context of mass higher education (Pollitt & Bouckaert, 2011).
Another critical factor for understanding the relative decrease in the dominance
of public higher education is the fact that the recent expansion of higher education
has coincided with a period of increasing constraints on public expenditure that
has affected higher education as well. The difficulties in funding the continuous
expansion of higher education have been a problem for both richer and poorer
countries alike. In the case of the former, the so-called crisis of the welfare state has
challenged the sustainability of the traditional financial reliance of higher education
on public funding (see Barr, 2004). In the case of countries with lower levels of
income, the financial limitations associated with a lower fiscal basis have been
regarded as a significant obstacle to the ambition of expanding the higher education
system on the basis of public funding.
Changes in the funding of higher education were also influenced by the changing
political mood that affected Western countries since the early eighties and then
progressively extended to other parts of the world. In the aftermath of the economic
turmoil of the 1970s, there was an increasing debate about the type and degree
of government intervention, with the ideological pendulum swaying towards
increasing liberalisation and market regulation and restrained government regulation
(Middleton, 1997). This was initially more visible in macroeconomic policy, but
then it started to pervade social policy in general and educational policy in particular
(Barr, 2004). The discourse over public services became populated by managerial
jargon and customer orientation.
The so-called neo-liberal revival has long and important roots in educational policy.
Already during the mid-fifties, Milton Friedman started to question what he called the
nationalisation of the education sector (see Friedman, 1961). According to Friedman,
the role of government would be largely unjustified in the types of education, such as
higher education, that clearly enhanced the individual’s productivity, since in these
cases, the individual would reap a major benefit through enhanced lifetime income
and therefore should be called on to bear most of the costs. In this case, Friedman
believed that the argument for nationalisation was weak, particularly as it would
introduce some major distortions in the functioning of the higher education system.
This led him to develop the well-known and controversial proposal of a voucher
scheme for funding. Friedman believed that the shift from institutional to individual
funding would enhance the competition between higher education institutions and
encourage better use of resources. Moreover, it would promote a larger diversity of
types of higher education, which he largely associated with private provision.
These opinions would face an increasingly congenial audience with the so-called
crisis of the welfare state during the 1980s. In OECD countries and elsewhere,
there were mounting pressures towards greater efficiency in the allocation of public
resources and in the management of public institutions (Cave et al., 1990). Although

16
 Private higher education

higher education institutions were recognised as a peculiar type of organisation

(Winston, 1999), many policy makers were keen on promoting a more managerial
type of behaviour by higher education institutions (Amaral et al., 2003). Moreover,
in several countries, the promotion of private institutions was regarded as an
instrument for fostering the assimilation of more efficient practices among public
higher education institutions through a better management of resources. This type
of rationale can be frequently found in discussions about the emergence of a strong
private sector in many higher education systems.
The arguments used in favour of the development of private higher education
were not only related to issues of internal efficiency, but they were also related to
debates about the degree of external efficiency of the higher education system (Levy,
2002). The private sector was supposed to demonstrate an increased capacity for
exploring new market opportunities and for occupying market niches by using its
higher administrative flexibility and financial motivation. Private and private-like
institutions – meaning those institutions treated as if they were privately owned –
were to promote a better balanced supply of higher education from a geographical
and disciplinary perspective. A similar rationale was present with regards to labour
market demands, as the expected greater responsiveness of private-type higher
education institutions was regarded as a powerful force driving institutions to supply
qualifications that were more suitable to labour market needs. The changes aiming at
strengthening market forces and a greater role of private initiative in higher education
were expected to favour the emergence of innovative behaviour (Geiger, 1986). In
recent decades, the debates about the public–private mix in higher education would
echo the type of arguments used to justify the growing role of market regulation,
more competition, and increased privatisation.

5. CONCLUDING REMARKS

Either due to a change in the ideological and political context or to pressing

financial constraints, privatisation of higher education has become a fast-growing
reality in many countries worldwide over the last decades of the twentieth century.
In many higher education systems, the trend towards privatisation has occurred
mostly by increasing the private-like aspects of the dominant public system through
stimulating competition in terms of students and funds, rather than by promoting or
even allowing the emergence of a significant sub-sector of private higher education
(see for example Vincent-Lancrin, 2007; Santiago et al., 2008). In other regions,
impressive increases in enrolments have become common, partly as a result of the
expansion of the private higher education sector (Altbach, 1999). For some systems,
such as those in Eastern Europe, this meant the emergence of a completely new
reality. In addition, in Africa and Southeast Asia, this new wave of privatisation
engulfed the previous experiences (which consisted mainly of religiously-affiliated
institutions), and changed the almost insignificant presence of private higher
education into a sizeable part of the system.

17
 Table 1.4. Main features in development of private and public higher education provision in a global scale

18
Development of private provision Development of public provision
Time line
Features Regional focus Driving factors Driving factors Regional focus Features
P. Teixeira

First modern Latin-America Influence of the Growth of the Continental Establishment

wave of private Catholic Church modern state - Need Europe and/or visible
universities for trained elites regulation of
18th century
North-America Influence of institutions
protestant by public
denominations authorities
Development of Asia Influence of Quest for national Europe - Latin Increased
private higher missionary colleges homogenization - America - Arab State control
education and increasing 19th century Increasing need for countries over higher
westernization qualified personnel education
institutions
Resurgence Latin-America Addressing growing
of Catholic secularization
Universities
First half
Acknowledgement Western Higher
of the strategic Europe - North education
importance of America expansion
Post-Second higher education -
World War Increasing need for
decades qualified personnel

20th century
20th century

Emergence or Eastern, Central Budgetary Worldwide Mass Higher

rapid growth of and Southern constraints - Demand trend Education
private higher Europe - Latin for access and high
Last decades
education America - private rates of return
Southeast Asia - Quest for increased
- Africa efficiency
 Private higher education

This political and economic context has led many governments to test different
approaches to managing the higher education system, most often through the
introduction of some market mechanisms.4 An important dimension of these market
mechanisms has been the growing privateness of the higher education system. In
several countries, especially in Asia and South America, but also in Southern and
Eastern Europe, this has taken place notably with the emergence of a significant
private sub-sector in higher education. In this enlarged private sector, the role of
religion, which had been so important earlier, played a less prominent role in this
recent wave of privatisation. The growth of many of the new private players clearly
outpaced that of the church-affiliated institutions and this would also contribute
to changing the profile of private higher education and its role within the overall
system, creating important challenges at the policy level.
During the last two decades, private higher education has become a significant
force in higher education worldwide and this change has shaped the development
of higher education in many instances. In the next chapter, we will analyse the
challenges raised by these developments, attempting to identify major patterns and
peculiarities of this emerging reality in higher education worldwide. We will also
discuss the major regulatory issues fostered by this major growth of higher education.

NOTES
1
Parts of this chapter are based on Teixeira (2009).
2
In 1693, the Crown chartered the College of William and Mary (Virginia), and in 1745, the Connecticut
College (later renamed Yale College also in honour of a private benefactor) was chartered. In 1746,
the College of New Jersey (that would eventually become Princeton University) was chartered, and
in 1756, the King’s College of New York (nowadays Columbia University) was as well. In 1755, the
College of Philadelphia was established, which later became the University of Pennsylvania in 1791.
The last ones to be established during the colonial period were the College of Rhode Island in 1764
(nowadays Brown University), the Queen’s College in New Jersey in 1766 (now Rutgers University),
and finally Dartmouth College in 1769.
3
This is the case with some old universities in Japan, South Korea, Philippines, and Indonesia. Even
some of the new private universities in Asia have been able to reach a prestigious level, such as the
Aga Khan University in Pakistan. In addition, there are also a few high-quality specialised technical
institutes in the Philippines, and Thailand. In Singapore, there are elite business schools established in
collaboration with prestigious counterparts in Europe and the United States. Unlike other countries,
Indian private higher education institutions are heavily subsidised by the state (Altbach, 1999; Altbach
& Toru, 2004).
4
A market mechanism is usually presented by economics as a mechanism of allocation of resources
based on a multiplicity of individual decisions that, through the interaction of supply and demand
forces, satisfy social needs. A market system is normally associated with significant degree of
competition between individuals, a high degree of freedom for each agent, and a strong economic
motivation of individuals to obtain gains from those activities.

19
 PEDRO TEIXEIRA AND PABLO LANDONI

2. THE RISE OF PRIVATE HIGHER EDUCATION

Patterns of Development and Regulatory Challenges

1. INTRODUCTION

Globally, higher education is experiencing a rapid and unprecedented expansion.

This, combined with rapid socio-economic and political changes, has necessitated
policy changes in the field of higher education. Tight national budgets combined
with increased demand for higher education and enrolments have forced countries
to relax their controls over the provisioning and running of institutions, creating a
fertile environment for the growth of private higher education. Moreover, higher
education is increasingly being shaped by market forces (Slaughter & Leslie, 1997;
Teixeira et al., 2004). These policy changes have created quasi-markets that have
encouraged institutional competition within and between the public and private
sectors. In many countries, especially outside the OECD, there has been a rise in the
proportion of the 18–24 year old secondary school graduates willing to access higher
education institutions.
Within this expansion, a number of features are salient. First, over the past two
decades, the global trend has been towards privatisation. This has led both to the
growth of private institutions and to the adoption of private-like behaviours by many
public institutions. In many countries, private higher education is expanding more
rapidly than are public institutions, and this growth is also taking place in countries
where it would have been unthinkable two decades ago.
Second, there is diversity within the private education sector. The expansion
of the private sector has been marked by (a largely demand driven) institutional
differentiation within national and regional systems. While some private institutions
mimic existing ones, others are different in their governance, operations, and
academic offerings. The latter evokes a certain level of mistrust of private institutions
by the traditional public sector, forcing a revisit of definitions and purposes.
Third, there are continuous but fluctuating interactions between governments,
institutions, and market demands. The development of private higher education has
often been associated with the growing strength of market trends in higher education,
not only at the national level, but also because of increasing trans-nationalisation of
higher education activities. These trends continue to pose ever-new challenges to
regulatory bodies.

21
P. Teixeira & P. Landoni

Fourth, institutionally, it is becoming increasingly difficult to draw sharp

distinctions between the public and the private sectors, as each adopts aspects of
the other. The private dimension has steadily and systematically gained prominence
in many public institutions. For example, new systems of management and
administration have been introduced in public universities; financially, there has
been a diversification of the resource base to complement basic public funds, which
makes public institutions increasingly dependent on private sources (of funding).
Similarly, many private institutions claim that some of the roles they perform have
a clear social value and therefore public authorities should acknowledge that when
allocating funds. Overall, there is a blurring of the distinction between the public
and private sectors.
Finally, this expansion in higher education, and especially in case of the private
sector, has been largely unplanned and insufficiently regulated in many countries.
Thus, the debate about the current state in higher education policy and the need
to address the current mix of public and private sectors is fraught with complex
and urgent issues. Paramount among these challenges is the difficult balance, at
the political level, between maintaining broad access, especially for disadvantaged
students, and upholding academic standards. In this chapter, we will examine
some crosscutting policy issues, the main trends of policy instruments used by
governments, and the expected impacts they are having on private institutions. We
will start by presenting the major stylised facts about the recent expansion of private
higher education, moving afterwards to the analysis of those policy challenges.

2. SOME STYLISED FACTS ON PRIVATE HIGHER EDUCATION

The recent surge of private higher education requires a new look at privatisation
and its impact on higher education worldwide. In particular, one needs to go beyond
some of the “myths” surrounding private higher education in order to understand the
complexity of this important part of higher education. This section tries to identify
some of the most significant patterns emerging with this recent wave of private
higher education institutions.

2.1. Diverse Private Sector

One of the most significant aspects regarding private higher education is its striking
diversity. This is not an exclusive characteristic of the private sector, but its degree
of institutional diversity is significant. Whereas the public sector is often under
significant homogenisation rules, through regulatory instruments such as legal
framework, funding, staff policies, and student recruitment, private institutions often
present a reasonable degree of institutional diversity. In this enlarged private sector,
the role of religion, which had been so important earlier, played a less prominent role
in this recent wave of privatisation. This does not mean that there was no growth
of religiously-affiliated higher education institutions, but rather, this group lost the

22
 The Rise of Private Higher Education

dominant role it once had in most of the countries where the private sector had
longer roots (Levy, 1986, 2006). There was certainly a revival of church-affiliated
institutions in parts of the world where the political situation had clearly restricted
or prevented it, such as in several Eastern European countries (Wells et al., 2007).
However, even in those countries, that type of private institution often became a
minority in the private sector. The process of secularisation of many societies meant
that, despite some religious revival, most members no longer regarded higher
education as a sole province of the churches. Moreover, the most commercially
aggressive approach of many of the new private players clearly outpaced the growth
of the church-affiliated institutions, which often preferred to model themselves on
their more established and respected public counterparts.

2.2. Size

One of the main differences refers to size, since we can find very small and large
institutions, in most if not all, private sectors worldwide. The private higher education
sector is characterised by the frequent existence of some very small institutions, often
in large numbers (Levy, 2002). The number of enrolments is normally far fewer in
an average private sector institution than in its public counterpart. An analysis of
the database PROPHE – Programme of Research on Private Higher Education –
compiled confirms that this is a very common pattern. The average size of private
institutions is often half or one third of the average size of public institutions. This is
even the case in those countries that have a well-established private sector, such as
the United States, where the number of private institutions represents around 60%
of the total institutions, though they enrol less than 25% of the students. In Europe,
a recent study also noted that although for several countries the number of private
institutions clearly superseded that of public ones, the share of the latter regarding
enrolments was often much larger than that of private ones (see Teixeira et al., 2014).

2.3. For-Profit Nature

Another important source of diversity among private higher education institutions
has to do with their for-profit nature. Although historically private institutions were
established as not-for-profit institutions – as is the case with the old private universities
in the United States – recent growth of private provision has introduced increasing
shades of profit-seeking behaviour. The for-profit private sector has, in some cases,
attained reasonable success regarding enrolments Examples of this expansion of the
for-profit private sector can be found in Brazil, the Philippines, Malaysia and South
Africa, where the majority of the private sector is for-profit (Kinser & Levy, 2005).
Furthermore, although in many countries for-profit institutions are not allowed, many
private institutions, established with a not-for-profit status, have behaved as if they
were for-profit. This is, for example, the case with European countries (e.g. Portugal,
Romania, and Russia) and Latin America (e.g. Brazil, Chile, and Mexico), where

23
P. Teixeira & P. Landoni

institutions have focused their activities on areas where demand is very high and risk
and investment are very low. This has introduced important dynamics not only to the
private higher education sector, but also to the whole higher education system, as
the for-profit provision has often become a challenge to regulatory powers that have
shown difficulty in dealing with this emerging type of private institution. The degree
of commercialisation brought by this type of institution make the role of government
in providing reliable information and ensuring the quality of provision very crucial.
The available information on for-profit private higher education is still very
limited, including information on its actual size on a global scale.1 Some of the
developments in for-profit private higher education outside the United States
do often take the form of international collaboration stimulated by the rapidly
expanding demand for higher education in many parts of the world, especially in
Asia and Latin America. In some cases, this is done either by the establishment
of new campuses or by the acquisition of local institutions that keep their brand-
name even while being managed by the international owners (Kinser & Levy, 2005).
Sometimes, the international dimension can actually be interpreted as a mechanism
for circumventing national regulations and restrictions.

2.4. Institutional Mission

An important source of diversity within private sectors is its profile regarding

institutional mission. In many public sectors, there are also institutional differences,
and this even more the case within the private sector. Many private higher education
institutions are not universities, but rather specialised institutions that provide
higher levels of training in one or a few fields of study. Moreover, the role model
of the university as an institution with a research mission is largely mitigated in
the private sector. Whereas some private institutions try to obtain legitimacy, both
regarding the public authorities and society, through some research, this is not the
most common situation. The U.S. experience with prestigious private not-for-profit
research universities, often cited in policy circles as the example to follow in the
development of the private sector, remains quite unique regarding the significance
and relevance of private institutions for the development of graduate education and
research (Levy, 2006). There is nothing similar to that in most other countries that
have a sizeable private sector, even though countries such as Japan and Korea also
have some prestigious private research universities.
One can, however, observe a few examples of private institutions trying to
strengthen their reputation through more intensive activity in research. Some of the
examples in that respect can be found in Latin America, which may be explained by
size and the maturity of the sector in that part of the world. In his extensive study
about the research activity of the private sector in Latin America, Levy (1996) noted
increasing research intensity, especially in social sciences and public policies. In his
study, he identified and analysed the important role played by private research units
in those fields. These units are often associated with higher education institutions,

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 The Rise of Private Higher Education

for example in Mexico, Brazil, Argentina, and Chile. However, even where some
research activity is discernible, it is highly contingent on the concentrated disciplinary
pattern, mostly in social sciences, which on the one hand, tends to have less public
visibility and on the other hand, tends to attract fewer funds.2
In addition to reputable concerns, motivation for research efforts by private
institutions has been a possibility for earning additional income, especially regarding
applied research. In the early phase of the private sector’s development, there is
usually resistance to channelling public funding to private institutions, not the least
by public universities that fear seeing their funding share diminish. For example,
in many Western European countries where private supply tends still to be very
limited and recent, there are often significant obstacles for private institutions to
qualify for national research funding (though not to EU funding), which may be
completely unavailable to them. However, the availability of funding for private
institutions has become frequent in those systems where the presence of the private
sector has become a common feature of the higher education landscape. This is the
case in most Latin American countries (Balán & Fanelli, 2002). The change can be
explained by various factors, not the least of which are the growing influence of a
more established private sector and the realisation by the public sector that the shape
of the private sector (and especially its disciplinary composition) means that it will
not become a major competitor for research funding.

2.5. High Policy Expectations

One of the main characteristics of the recent expansion of private higher education
is that, in many countries with very different levels of income, governments have
allowed the private sector to develop rapidly in order to fulfil objectives of higher
levels of enrolment. This pattern of expansion, also called demand-absorption (see
Levy, 2002, 2006), is normally the result of strong social demand and lax regulation
by political decision-makers. The lax regulatory forces often stimulate opportunistic
behaviour from many of these newly established institutions by lowering entry
requirements or simply by not enforcing regulatory rules that are in place (Teixeira
& Amaral, 2007). Accordingly, private institutions are allowed to mushroom and
expand rapidly regarding the number of programmes and size of enrolments, at
times outpacing the expansion of the public sector. The private sector may move
from being almost non-existent to having a prominent role in the mass sector, as has
happened in several Eastern European countries. This kind of evolution may also
correspond to a strategy that gives pre-eminence to quantity rather than quality in the
development of private higher education institutions.
However, the relationship between policy makers and the private sector can often
be ambiguous. On the one hand, many governments create the conditions for rapid
development of the private sector through lax regulation of the sector. On the other
hand, they may maintain close bureaucratic control over private institutions that often
have less autonomy in some respects than do their public counterparts (Bernasconi,

25
P. Teixeira & P. Landoni

2011). Although there is a perception that governments do not seem very effective
in regulating higher education institutions, there is also a pervasive opinion that they
should not be trusted in the same way as public institutions (see Castro & Navarro,
1999). Moreover, the positioning of the private sector as a demand-absorbing sector
presents other risks. Governments may use the development of the private sector in
order to insulate the public sector from uncontrolled expansion. However, once the
demand stabilises, mainly due to demographic reasons, private institutions may be
the most vulnerable to that changing context (Teixeira & Amaral, 2007).

2.6. Strong Social Demand

Another important dimension in recent processes with rapid expansion of the

private sector has been the fact that expansion was fuelled by strong social demand
for access to higher education. This demand was supported by high private rates
of return and the perception that a degree was a very good long-term investment
(Psacharopoulos & Patrinos, 2002). These positive private rates of return tend to
increase significantly in those countries where the average level of schooling is low
and when a small portion of the population has attained higher education. This makes
individuals and families willing to take on a short-term financial burden because
they expect the long-term return will largely compensate for that.
The expansion of private higher education also created opportunities for new social
groups, especially in those countries where public higher education institutions have
attempted to retain some of their elitist nature. In these cases, expansion of the public
sector often relied on the recruitment of more students from social groups with high
economic and cultural capital (see Altbach, 1999; Wells et al., 2007), groups that have
traditionally been over-represented in higher education (Cohn & Geske, 2004). This
has led many students from families with lower academic qualifications enrolling in
private institutions, due to the difficulty in getting access to highly contested places
in the most prestigious public universities. The presence of significant portions of
students from families with lower income and/or lower cultural capital in private
higher education institutions can be found in different parts of the world. In Latin
America, where the private sector often caters to the majority of students, there
are several examples of this positive contribution to access. The difference between
public and private universities is often even more noticeable when comparing the
parent’s levels of schooling, with the latter enrolling a larger proportion of students
whose parents were illiterate or had less than secondary education.
However, these expectations have to be managed carefully, since they are not
always fulfilled. The data on rates of return are often an average result that hides
significant differences according to degree. This is a problem that in the mid-term
may create significant frustration, especially if the pattern of disciplinary and
geographical concentration of private institutions creates an excessive supply of
graduates in certain areas. Moreover, since the cost of attending a private institution
tends to be much higher than that for a public institution, expansion of the private

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 The Rise of Private Higher Education

sector does not guarantee that disadvantaged groups will see their educational
opportunities greatly enhanced.

2.7. Relevance and Efficiency of the Higher Education System

One of the most significant and discussed results of the recent privatisation has to do
with its contribution to the external efficiency of the higher education system (see for
example Teixeira et al., 2012a, 2012b). The expectation was that the development
of the private sector would contribute to making higher education more responsive
to labour market demands. It was argued that privatisation could make the higher
education supply better balanced from a disciplinary perspective, reaching a wider
geographical area than could traditional institutions, therefore producing graduates
that are better suited to foreseeable labour market needs (ibid.). However, the strategy
towards quantitative expansion and demand absorption seems to have undermined
those expectations.
Initially, there were strong expectations regarding the extent to which private
institutions would bring a more diversified supply at the regional level. However,
more recent research in higher education has questioned this embedded belief. In the
specific case of countries where a late process of privatisation played a role in the
massification process, there are indications that the private sector has had an overall
negative effect on the diversity of the higher education system (Teixeira & Amaral,
2002; Teixeira et al., 2012a). This is the case in European countries with a large
private sector, in addition to in Latin America and many Southeast Asian countries.
The analysis of recent waves of private institutions indicates that the private sector
tends to be strongly concentrated in the region of the capital city and in major urban
areas. The analysis of recent waves of privatisation shows that private supply tends
to be highly concentrated in the wealthiest and most highly populated regions (see
Geiger, 1986; Altbach, 1999). In contrast, the public sector, in general, presents a
more diversified distribution from a regional point of view due to the influence of
local and regional authorities on governments.
Another result that tends to contradict most policy expectations concerns the
disciplinary diversity of institutions emerging with privatisation. For example, Meek
et al. (1996) considered that institutional responses to growing private provision,
as well as increased market competition, could lead institutions to diversify in an
attempt to capture a specific market niche, in addition to imitating the activities
of their successful competitors. The private higher education supply is frequently
concentrated in low-cost programmes with strong student demand, such as social
sciences (e.g. law, economics, and management) (Wells et al., 2007). Private
institutions do not tend to invest in programmes with less promising employment
prospects or in more technical and costlier areas, where their presence is relatively
lower than that of the public sector (Levy, 2002).
In countries with a significant private sector, it is not unlikely to find that more
than half of their enrolled students are concentrated in social sciences. In contrast,

27
P. Teixeira & P. Landoni

the presence in more technical and costlier areas tends to be lower than found in the
public sector (see individual country studies in Wells et al., 2007). The costs of running
programmes in those areas would imply very high tuition fees, and in many cases,
this is hardly viable in terms of attracting enrolments. At the same time, these areas
tend to be much more regulated, both by governments and professional associations,
and it takes time for private institutions to obtain public and professional recognition
of their degrees. Thus, the pattern of regional concentration of the private sector is
coupled with a strong concentration on disciplinary distribution of enrolments.

3. KEY POLICY ISSUES AND CHALLENGES

3.1. Funding

One of the major issues in higher education policy and regarding the role of the
private sector is that of funding. As the costs of HE increase rapidly, a key issue
is how it is funded (Barr, 2004). There are several reasons for the rapid increase in
cost. Massification has increased the number of college students, and expenditure
per student has been increasing much faster than has the inflation rate and the overall
productivity change in the economy,. This is because higher education is very labour
intensive and it is difficult to increase productivity in such an industry (Archibald &
Feldman, 2010). Therefore, the cost of higher education increases faster than does
the cost of other goods and services. Expectations about the quality of learning have
also grown, which adds to the expenditures of higher education institutions. As a
result, the fiscal burden of higher education has been increasing for governments.
However, because of financial limitations, many governments find it difficult to
meet the demand for expanding welfare programmes, and are reluctant or unwilling
to spend meagre public resources on higher education (Barr & Crawford, 2005).
The rising cost and shrinking public resources force many public universities
to seek private funding, including profit-making activities, while many private
universities seek public funding or subsidies (Teixeira & Koryakina, 2011).
Therefore, the distinction between public and private higher education institutions
only according to legal ownership is becoming tenuous. Furthermore, as the quality
of higher education deteriorates in the midst of rising demand, opportunities in
for-profit higher education operations have been expanding throughout the world.
Even in systems where private institutions are not supposed to be publicly funded,
there are voices that claim that at least their students should be entitled to some
governmental support. By the same logic that governments have been increasingly
asking students enrolled in public institutions to contribute to overall costs through
cost-sharing, it could be argued that public support be extended to some activities
in private institutions. Furthermore, if it is accepted that higher education produces
both social and private benefits, then by definition, private higher education also has
a public good dimension, at least to a certain extent. One dimension that clearly has
social benefits is the research conducted by private institutions.3

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 The Rise of Private Higher Education

3.2. Regulation

Another critical policy issue is the degree of regulation by the government. All
countries have some level of government regulation of the higher education sector,
for which there are several grounds. First, when the institutions are supported fully or
partially by the government, the government wants to make sure the money is spent
according to the goals and missions of public expenditure. Second, students and their
parents have an informational disadvantage vis-à-vis the supplier of higher education.
When students enter an institution, it is unlikely that they know beforehand about
their educational experience. Also, upon completion, if the students are not satisfied
with the education received, it is virtually impossible for them to reclaim their
expenses. Therefore, in order to reduce the negative social impact due to asymmetry
of information, the government needs to regulate institutions. Third, according to
the current economic knowledge, governments realise the critical importance of the
availability of a competent and highly trained pool of human resources (the social
capital) for development. Thus, regulation is also necessitated by the requirements
of the development agenda. However, it seems that most governments regulate
institutions much more than they do other industries, clearly beyond the rationale of
imperfect information. The reasons for that tendency of over-regulation are usually
not economic, but rather, they are political and historical.
In the complex scenario of a rapidly expanding and diversifying higher education
sector, government intervention through regulation is limited. The relevant policy
question is not how much government intervention is adequate, but rather, what
can governments do and how can they do it in the best way (Jongbloed, 2003:
131). Higher education systems are regulated by laws, sometimes specific to higher
education or as part of education as a whole. Basic arrangements vary from highly
integrated and homogeneous systems with common rules for public and private
institutions (e.g. the Netherlands in Europe and Colombia in Latin America) to
systems with different sets of regulation for each sector. Roles of the Ministries
of Education vary in each case, and in homogeneous systems, strong Ministries
are more common. Even in cases where there are differences in the regulation of
public and private institutions, Ministries play an important role in the authorisation
and control of private institutions, allowing public universities to maintain a fairly
autonomous status.
Governments, and sometimes public universities, use legal systems as an
instrument of coercive isomorphism (Zucker, 1987), putting deliberate pressure
on the private institutions to conform to a model considered as being legitimate
(Levy, 1999). In extreme cases, the state may specifically dictate the types of
institution through its regulatory mechanism and oblige the institutions to conform
to certain institutional types, as well as governance and organisational models. For
example, the state may decide on a set of categories, allocating each institution
to one of the categories. Making the change between categories requires specific
government permission. In the other extreme, the differentiation between the types

29
P. Teixeira & P. Landoni

of institutions can be left to the market so that each institution can seek out a specific
category depending on the location, tradition, brand image, resources, and market
opportunities.
An important aspect in the regulation of private higher education has been
the emergence of the for-profit sector. This has led to debates about competition,
markets, and fairness, and also to calls for a stronger and more attentive regulatory
framework (Kinser & Levy, 2005). This for-profit dimension of private higher
education, combined with trans-national activities, raises complex regulatory issues.
Because they are difficult to handle and do not fit into the traditional categories,
even of private higher education, the for-profit sector has been largely overlooked
by regulators. In fact, some of the most critical voices towards these for-profit
institutions come from the not-for-profit private sector. This is unsurprising, since
the latter are often most affected in the competition for students and faculty by
these for-profit institutions. Furthermore, the for-profit institutions depart more
significantly from traditional academic stereotypes, whereas previous generations
of (not-for-profit) private institutions often mimicked their public counterparts in
terms of academic organisation, types of programmes, and governance structures
(Kinser et al., 2010).
The for-profit dimension in higher education goes beyond that of the formally
for-profit institutions. In many countries, although private institutions are formally
not for-profit, their behaviour often has a clear for-profit orientation. This is even
more likely in countries that rule out the existence of for-profit institutions. The for-
profit aspect is also becoming relevant for public institutions, due to the increasing
pervasiveness of the ‘managerial’ approach and commercialism (Birnbaum, 2001;
Morphew & Eckel, 2009). The growing adoption by public institutions of private-
like managerial practices has led many of them to explore activities that would fit
more clearly into the mission statement of a business or a private company (e.g.
providing paid consultancy services to external contractors) (Bok, 2003). A further
challenge has arisen because of the internationalisation of higher education. Private
universities from developed countries moved rapidly into the global market, offering
programmes and establishing partnerships with local institutions, or via distance
education. The international arena has been an attractive new market for the for-
profit institutions (Levy, 2002a).

3.3. Quality and Accreditation

Quality has received a significant amount of attention with the development of

private higher education, reflecting what is perceived by public authorities as being
a major concern of employers, academics, students, families, and society in general.
The concerns with quality have been finding increasing support among the private
institutions themselves (Castro & Navarro, 1999), since many private institutions
find it hard to compete with public institutions and feel the need for greater legitimacy
in order to attract students in sufficient numbers.

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 The Rise of Private Higher Education

The low priority given to research by many emerging private institutions in most
countries is due to various factors of financial and administrative nature. Research
activities, especially basic research ones, have a very limited short-term economic
return, despite their sometimes high social value. Since, in most countries, private
institutions have limited or no access to public research funding (and cannot find
alternative sources of philanthropy), they have to fund those activities themselves.
Thus, when some private institutions develop research activities, this is based on
cross-subsidisation from teaching funds, mainly to enhance their prestige and attain
some degree of academic legitimacy. It is not unlikely that some of those institutions
will tend to give more attention to research activities in their process of maturation,
especially as an instrument of social and political recognition, or under the presence
of quality assurance labels.
A large part of the reason for the low research profile with the recent development
of the private sector has to do with staff issues. Many private institutions have a
strong reliance on part-time staff (Levy, 2006). This issue tends to be particularly
visible in the early phases of development of the private sector, since recently
established institutions often find it difficult to recruit new staff and therefore tend to
rely on staff who are already committed to other institutions, often public ones. This
practice of “moonlighting” has created tensions between private and public higher
education institutions (Altbach, 1999) and has raised concerns about the quality of
the educational provision, for example in places as diverse as Eastern Europe, Latin
America and South Asia. On the other hand, some parts of the private sector may
be inclined to recruit practitioners to be a part of the academic staff to strengthen
their link with the labour market. Thus, the private sector tends to present a higher
percentage of part-time staff (especially academic staff) that is clearly above those
observed in their public counterparts (Levy, 2006), even in countries with more
mature processes of privatisation. This is more visible in the Mediterranean and
Latin American countries. The main rationale for this is the cost advantage. Not only
does part-time staff cost less, but it also provides a more flexible cost-structure that
may help the institution to adapt to changes in student demand (see, for example,
Altbach, 1999; Wells et al., 2007). In addition, not only is there the problem of good
quality faculty, there are also shortages in sheer numbers, which increases the ratio
of faculty to students and dilutes quality. Other problems include a perceived lack of
investment in infrastructure (buildings, libraries, laboratories, and equipment) and
dependence on traditional models of teaching, learning, and assessment.4
Because of concerns about the quality of many private institutions, governments
have implemented evaluation and accreditation mechanisms. By 2005, more than
100 countries had adopted evaluation and accreditation procedures for institutions
and programmes (Brunner, 2005; GUNI, 2006). In Europe and Latin America,
accreditation is fundamentally a governmental endeavour, however, it is usually
implemented through a specialised autonomous agency (as required by the ESG).
In some countries, accreditation agencies and procedures were promoted after the
explosion of the private sector.

31
P. Teixeira & P. Landoni

Accreditation mechanisms are growing in complexity and differentiation. A

common trend is to have graduation requirements for new private universities,
usually with mandatory accreditation processes, before they are granted greater
autonomy to develop new programmes or open new campuses. Some countries have
a common set of standards for all institutions and others have different criteria for
sectors (public-private) or hierarchy (university and tertiary levels). Internationally,
a discernible trend is changing the focus of evaluation processes from inputs to
results (Jeliazkova & Westerheijden, 2001; Westerheijden et al., 2006). Initially,
most focused on quality of inputs, such as faculty–student ratios or number of
faculty holding higher degrees. The focus is now shifting to performance indicators
and outputs.
Accreditation is a strong incentive for improving quality. Institutional and
programme evaluation provides information to relevant stakeholders. Accountability
of private institutions is mainly through the market, and therefore, being accredited
can be a strong asset to attract students. There is some evidence that private
institutions in countries in Latin America and Eastern and Central Europe are more
active in applying for accreditation than are their public counterparts. Accredited
private institutions are usually granted greater autonomy and, therefore, they
usually expand into new programmes or locations (Bernasconi, 2003). Accreditation
mechanisms have also been an important factor in curtailing private proliferation, as
in Latin America and Europe (Lemaitre, 2009).

3.4. Access and Equity

A major issue in any higher education system is that of equity. The remarkable
growth in higher education enrolment numbers has not led to equitable access for
all. Some scholars have pointed out that the social composition of the student body
has become narrower, leaving a large number of qualified applicants with no place
in the universities. These scholars argue that the current pattern of access to higher
education may be introducing novel forms of social exclusion, with the traditionally
underrepresented groups still remaining largely excluded (Sacks, 2003; Zusman,
2005).
Growing segments of population are demanding postsecondary studies, pushing
higher education expansion (Altbach, 2005). Traditional universities are unable to
accommodate the new students, and therefore, the state is forced to open new public
universities, most of the time having a lower quality of instruction and research
(Cosentino de Cohen, 2003). In other cases, where governments were unwilling or
unable to create new public institutions, the private sector meets the demand, raising
concerns that their higher fees may be too high for poor secondary graduates.
The main instruments used by governments to promote equitable access have
been subsidisation of higher education (mostly to public universities) and provision
of scholarships and loans for students. However, traditional public policy of
financing public institutions has been questioned in the last decades, largely on the

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 The Rise of Private Higher Education

argument of perverse distributional effects (Teixeira & Amaral, 2001; Johnstone,

2004). Since most students entering higher education come from upper income
levels, public resources collected from society are a social transfer to the rich. As a
result, in recent years, governments pursuing increased access and fairness started
to change financial schemes in two directions. In several countries, better results are
being achieved by lump sum subsidies based on achievement criteria like increasing
access for low income or minority students, or decreasing dropout rates. At the
same time, governments provide funds for research and graduate studies, promoting
competition among institutions as an incentive to improve performance in areas with
high social returns.
According to the economic rationale, there is a justification for tuition fees as A
method of cost recovery for the private returns of higher education. In terms of equity,
problems arise when tuition costs impede poor but qualified students from accessing
higher education, which provides the rationale for subsidies like scholarships, loans
or vouchers. Nonetheless, there are important implementation problems for these
policies. The Impact of cost recovery on access to higher education is a hotly debated
policy issue (Barr, 2005; Jongbloed, 2006; Brunner & Uribe, 2007).

4. CONCLUDING REMARKS

Although there are some national and regional peculiarities, the emergence of
private higher education around the world has highlighted a significant number
of commonalities. Thus, in this chapter, we have reviewed a set of common
characteristics that seem to characterise many private higher education sectors,
notably regarding size, diversity, purpose, academic and disciplinary profile, and
geographical distribution. These commonalities underline the importance of placing
a greater emphasis on taking a comparative approach in the study of this sector,
trying to disentangle the commonalities from more nationally or regionally specific
aspects.
Moreover, the rise of private higher education around the world has also been
associated with several important policy issues and challenges. If private higher
education has led to the emergence of new challenges and complexities, in many
cases it has also highlighted traditionally important issues in higher education
policy. Although in some countries, the rise of the private sector has contributed to
exacerbating old problems such as the ones of quality and equity, in other countries,
it has contributed to alleviating some significant difficulties, such as access and the
financial resources required for expanding the system. Thus, it strengthens the view
that private institutions not only should be regarded as a major priority in higher
education policy agenda, but also they should be regarded as a part of the system that
can be used to help it better perform its missions.
Thus, in the next chapter, a proposal of an analytical framework that tries to
systematise the context and factors leading to the emergence of a significant private
sector will be presented, as well as the assessment of the contribution of this sector

33
P. Teixeira & P. Landoni

for the fulfilment of leading functions and purposes of the higher education system
as a whole.

NOTES
1
One of the few studies on the subject has shown that private for-profit higher education covers
roughly 5% of all higher education enrolments in the United States and employs roughly 3% of the
faculty, even though, at the same time almost 50%, of all American higher education institutions are
private for-profit establishments (Kinser & Levy, 2005). The shares in relation to all private higher
education providers are clearly higher, at 24%, 9.5% and 62% respectively. The study also indicates
that a large part of enrolment in this type of small institution tends to be in the non-university sector,
even if the most visible growth has taken place through a few universities (Kinser, 2006), such as, for
example, the University of Phoenix, which is the largest U.S. university.
2
For an illustration of this, see the analysis of the Japanese case in Goodman and Yonezawa (2007).
Levy (1996) also pointed out that the private sector traditionally concentrated on certain fields, which
was clearly reflected in its research activity.
3
One critical issue in this respect refers to equity, and the fairness of restricting student support to those
enrolled in private institutions has been questioned, especially in countries where private institutions
enrol a significant number of students due to public institutions being clearly insufficient to meet
the demand. Issues of funding become even more complex where public–private partnerships have
developed, as in South Africa. Although still negligible, their (likely) development will further blur the
boundaries between public and private sectors and further complicate the criteria for the distribution
of public money.
4
However, a number of the old private universities in Latin America, East Asia, and the Arab world
have been able to provide high quality education, which is largely related to their being non-profit
institutions (Altbach, 1999). This enables them to invest most of their resources in improving the
quality of education rather than sharing profits between shareholders.

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 SUNWOONG KIM

3. UNDERSTANDING THE PUBLIC-PRIVATE

MIX OF HIGHER EDUCATION
A Proposal for an Analytical Framework

1. INTRODUCTION: CDFE MODEL

The world is experiencing a rapid expansion of higher education. The expansion

is not limited to more developed nations in which tradition of higher education
has been in place for several centuries. Even in many low income countries, the
expansion of higher education is quite remarkable (Schofer & Meyer, 2005).
Accompanying the rapid expansion, the role of the private sector in higher education
has become more important. In some countries, private providers enter the market in
large scale to meet the burgeoning demand for higher education. In other countries,
the functions of higher education traditionally provided by the government have
been delegated to the private sector in order to supplement the rising expense of
providing HE. In other countries, market-like mechanisms are created in an attempt
to improve the efficiency of the existing higher education system (HES).
The more prominent role of the private sector in higher education creates
challenges as well as opportunities in many countries. The private higher education
institutions (HEIs) are known to be more successful in accommodating larger and
more diverse demand for higher education. The emergence of private HEIs reduces
the fiscal burden of the government in meeting the growing demand of higher
education. At the same time, the private providers tend to act more opportunistically
so that the need for quality control and safeguards for corruption are more in need.
As the HES becomes more universalized, virtually all governments need to deal
with the complicated and idiosyncratic mix of public and private relations in higher
education.
However, HESs are quite diverse across the globe. In some countries, more
than three quarters of the age group between 18 and 20 are enrolled in HEIs. In
other countries, the enrolment rate is less than 5 per cent. As Martin Trow (2005)
suggested, a HES can be elite, mass or universal, and the enrolment rate is the key
indicator that distinguishes them apart. From the perspective of financing, in some
countries there are no student tuitions or fees to attend HEI, as the universities are
financed by the general tax revenue of the government. On the other hand, the tuitions
for major private HEIs in the U.S. are more than US $50,000 per year per student. In
some countries, the HES is basically run by the government, while in other countries

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S. Kim

substantial proportion of HEIs are established and run by the private sector. In some
countries, universities have more than 500 years of widely recognized history and
tradition, while in others HEI is a rather new type of social organization. In order to
analyze such a diverse mix of HESs, we need a coherent theoretical framework that
can be applied to different countries. Such a framework needs to be flexible enough
to encompass the diversity among the systems, but at the same time, simple enough
that a particular HES can be understood by applying to it.
In the development of a theoretical framework in order to study diverse public-
private mix of HES around the world, we consider that there are three major
interrelated aspects that are most essential: Context, Dimensions, and Functions. At
the same time, it is important to be able to evaluate the HES from the perspective of
the set of universal criteria. We shall call this theoretical framework CDFE model.
C stands for “context” of the country’s history, politico-socio-economic situation
under which the HES has to operate. D is for “dimensions” of the definition of
the public-private mix of a HEI. F represents “function” that HEIs are supposed
to deliver within the particular context of the country. Finally, E stands for
“evaluation.” The Model is represented in the diagram shown in Figure 3.1. In the
diagram, HES is represented by a matrix of Functions and Dimensions. It is situated
within the Context of a particular society, which is represented as the circle in the
diagram. The whole system of HES can be evaluated by using the criteria of three
E’s (Effectiveness, Efficiency, and Equity).

Figure 3.1. CDFE model in a diagram

First of all, it is important that one needs to understand the external context
within which individual HEIs and the whole HESs operate. The external context
includes historical tradition in which the role and functions of HEIs are defined.
It also includes the level of economic development (commonly measured by per

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 Understanding the Public-Private Mix of Higher Education

capita annual income) of the society. The level of economic development determines
not only the demand for higher education in the domestic economy but also the
capacity of the public sector to support the higher education sector. The context
is the combination of mostly exogenous factors that policy-makers may consider
when exploring any options for improvements. In the long run, of course, any of the
elements of the context may change, but the elements of the context can reasonably
be assumed fairly stable during the policy makers’ planning horizon.
Second, the socially accepted roles and functions (we shall call them “functions”
hereafter) of HEIs and HESs should be identified. The functions a HEI or HES
bestowed by the society may differ quite substantially across countries. In many
respects, these functions crucially depend on the context mentioned above. That
is, public policy goals are an important element in determining the functions. For
example, in some cases, HES is regarded as the major social instrument for the
development of highly skilled workers who become the leaders in a variety of
sectors, not only science and engineering, but in law, politics and the economy. In
other cases, HE is regarded a basic right of citizens that should be provided by
the government. In those cases, HE is supposed to be provided by the government
without any tuition payments. In some cases it is explicitly guaranteed in the country’s
constitution. Clearly, such difference in their social expectation toward HES would
result in a very different operation of the systems. However, some functions are
considered generic and others are subject to the demands of a particular society or
market.
Third, as the main goal of our effort is to analyze the public-private mix of HES,
one needs to think about the different dimensions of public-private mix of a HEI.
Although the ownership of the institution is an important element of classifying a
HEI into a public or private institution, we find that such classification is overly
simplistic in modern context. The funding source of the institution and the level of
autonomy under which it operates, is also an important criterion.
Finally, the purpose of the comparative analyses is to be able to evaluate the HES
in its own unique context from a perspective of uniform criteria. The most widely
accepted criteria in the evaluation of public policy and social system is the dual
criteria of efficiency and equity. Since HES serves non-economic objectives such
as the creation of national identity and a vehicle of the nation’s cultural heritage, its
effectiveness on those counts should be considered as well.
In the following sections, we discuss each element of the model. First, we describe
the external context in which HES operates, the internal dimension of the HEIs, and
the function of the HES is supposed to perform. Then finally we discuss the universal
criteria in evaluating the system in order to design policy alternatives to improve it.

2. CONTEXT

The higher education system in a specific country evolves and is influenced by

a multitude of historical, political, social, and economic factors. Therefore, it is

37
S. Kim

necessary to identify such contextual variables as they are crucial determinants of

the scope and functions of the HE system or a specific institution within the system.

2.1. Historical Tradition in Higher Education

Different countries have different historical tradition in regards to the provision of

education in general and HE in particular. In some countries the availability of HE
limited to a few elite. In other countries, higher education has been massified. For
the elitist tradition, the selection of students in HE is typically very competitive. For
example, in the Chinese system till a couple of decades ago, HE enrolment rate was
less than 5%, and in order to be admitted to a HEI, the student had to go through very
competitive entrance examinations. The entrance to the elite system may start earlier
during the student’s career. Germany and Austria have uncompetitive admission
procedures but the pre-selection for college-bound students happens much earlier in
the student’s career.
Another important aspect of historical tradition is how the higher education is
financed. In some countries, HE tuitions are provided free of charge or with very low
user fees, because it is financed by the general tax revenue. When college education
is free, it will be difficult to make the enrolment rate very high, because it would be
too burdensome for the government to finance it. Therefore, it is natural to expect
that when higher education is a social right with no or very little student fee and HE
is heavily subsidized by the government, it has to be accompanied by a mechanism
to limit the candidates for HE in order for the HES to be sustainable. It is ironic that
such a seemingly noble social goal of free HE is incompatible to another seemingly
noble social goal of universal or open HE.
The recent rising demand for higher education brings about different challenges
depending on the historical tradition of the higher education sector in a country. For
example, for a country such as Germany, with the tradition of low enrolment rates,
open admission, and heavy government financing, the rising demand would create
fiscal pressure on the government and the lowering of standards of instruction. On
the other hand, for countries such as China and Brazil, with low enrolment rates,
competitive admissions and heavy subsidy, rising demand will inevitably create
a second-tier-overflow university system in which public universities (with no or
low tuition and high instructional quality) are at the top and private universities
(with high tuition and low instructional quality) at the lower rungs. In countries like
Pakistan and Egypt with heavy private involvement and rising demand, greater entry
of private higher education including for-profit universities is the likely outcome.
In these cases, low quality and standards and the possibility of corruption in private
universities would be major policy concerns.
Another historical context is the relationship between the state and religious
organizations. In many Latin American countries, the Roman Catholic Church
has been closely associated with the state, and schools established by the Church
have been financially supported by the state. In other countries, such as in the U.S.,

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Church and state has been separated quite clearly, and universities established by the
Church were clearly regarded as private.

2.2. Regulatory Environment

In some countries, the HEIs regulate themselves through peer-reviewed accreditation

process. In others, they are regulated by the government or a quasi-public agency.
Even with the self-regulatory mechanism of peer-review accreditation process, the
government plays a pivotal role, because it may specify the benefits of accreditation,
in terms of government provided student aid, eligibility for research grants and so
on.
Under the peer-regulation system, institutions are less likely to give up their
autonomy unless there are tangible benefits associated with regulation. Therefore,
such peer accreditation system would have limited powers in dealing with institutions.
Given the weak power of the accreditation agency, the agency and institutions are
likely to form a cooperative relationship rather than the top-down government
regulatory agency. The greatest strength of the self-regulation mechanism is that it
is better at recognizing the changes in the HES and likely to accept the initiatives
member institutions take in dealing with such changes. Its second strength is the
willingness to accommodate diversity among institutions. However, the system can
be hijacked by the established institutions that pursue a specific set of goals. Should
this happens, the self-regulation system may not survive when a large number of
members decided to drop out of the process.
Another dimension of the regulatory environment is the distribution of power
among central government, regional government and local government. If most
of the power is concentrated in the central government, it is likely that strong
centralized control and bureaucratic governance structure exists. On the other
hand, decentralized policy will tend to create more grass-root democracy in which
lower levels of government and citizen participation is greater. However, in most
developing countries, the level of competency and ethical standards for central
government officials are typically higher than those of local government officials.
Therefore, although the decentralized polity is likely to be more under local control,
and therefore is more likely to be flexible and responsive to the local needs, but it is
likely to be subject to corruption.

2.3. Policies and Situations in Other Parts of the Education Sector

The most important determinant of the demand for higher education is the number
of graduates from the secondary education sector. Holding everything else constant,
the demand for higher education would be greater if the number of high school
graduates were higher. In many countries, the expansion of secondary school
enrolments creates a severe pressure for the massification of HE. Also, when the
secondary schools are universal and free of charge, one would expect that the

39
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enrolment rates for secondary schools would be very high. Therefore, in such cases,
one would expect demands for HE would be high as well.
Similarly, the demand for secondary education depends on the number of
graduates in primary schools, as well as on how the secondary sector education
is financed. Combined with universal education, free secondary education would
create a large high school graduates. Obviously, the ability to finance universal
secondary education crucially depends on the fiscal capability of the state. Free
primary and secondary education mandates substantial government resources, and
reduces the fiscal capacity to support large scale higher education. Such trade-
offs between different levels of education would be more crucial in low income
countries.
For example, if the low income country invests heavily in universal primary
education, it would generate a large number of primary school graduates after a
while. The large number of primary graduates may create political pressure to
absorb them in to the secondary schools, and the country may push for universal
secondary education. If so, the fiscal demand for education may increase so that
the quality of primary and secondary education may deteriorate substantially. Also,
the government may not have a great deal of fiscal resources available to support
higher education. Such long-term trade-off between the introduction of universal
primary education and the negative consequence on higher education is likely to be
overlooked in the policy debate.
Once in place, such policies are likely to have inertia due to the formation of
the coalition of protected interest groups. For example, teachers in primary and
secondary school may resist any reduction of resources to those sectors, when the
government wants to increase resources to its HES. Therefore, the policy options
in HE is heavily constrained by the policies and current situation in primary and
secondary education sectors.

2.4. Income Level

The income level of the populace is also an important determinant of the demand for
higher education. From a perspective of human capital theory, the marginal return
of high education will increase as the level of economic development progresses. At
the high level of accumulated capital, the marginal productivity of worker is high, so
do the wages. Moreover, in the knowledge-based economy, the return for advanced
education is likely to increase. Therefore, one would expect higher demand for
higher education in a country in which income level is higher and/or where the
economy is more knowledge-based.
Some scholars have argued that more education does not necessarily improve the
productivity of the recipient, as the principal function of the diploma is the credentials,
not abilities. Following this logic, they argue that HES is utilized to maintain the
privileged position of the upper class citizens. Even within this theoretical framework,
as the income level of the country increases, demand for HE would increase as well,

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because in the higher income society, the difference between the upper and lower
class would be greater, thereby creating more incentives for obtaining HE.
Moreover, if one views higher education as consumption good, high income
countries are likely to have more demand for higher education. Since education is
most likely a normal good (i.e., the demand increases as income increases holding
other things constant), people would like to obtain more higher education as income
rises.
The general income level of the nation also affects the fiscal resources that can
be mobilized toward HE. Although the level of government expenditure spent on
HE should depend tax rates and the political will of the nation as well, the level of
income would be one of the most important determinants of the amount of the public
resource available for HE.

2.5. Growth and Changes in Population

Growing population and particularly the increase of the conventional college going
age groups (i.e., 18–24) increases the demand for higher education. Depending on
the country’s demographic situation, the number of college-bound students may
fluctuate. When the country is expecting a rapid increase in the number of college-
bound children, one would expect that the demand for higher education would
increase as well.
Besides the market response, the younger population structure would promote
more spending on education (rather than, say, health care) through the political
process. Although it may be difficult to predict how demographic structure affects
the political dynamics of a particular country, the government spending in education
would be clearly skewed toward the young, i.e., the younger generation benefits
while the older generation pays, if the country has more young people. Therefore,
the current and future demographic structure should be examined carefully, when the
private-public mix of HE is discussed.

3. DIMENSIONS OF PRIVATE-PUBLIC MIX: LACK OF COMMON DEFINITIONS

How ‘public’ or ‘private’ is a higher education institution (HEI) or a higher education

system (HES) is understood quite differently to different people. Many view
that private HEI implies private ownership; to others private HEI means that the
institutions are seeking profits (overtly or covertly) by providing higher educational
services. In some cases, private HEI means the operational autonomy in academic
and administrative affairs free of government regulations. The different meanings
with which the same terms are being understood add to the confusion and conceptual
difficulties. Therefore, it is imperative to try to develop a clear definition when we
discuss private higher education.
In the discussion below, we identify four major dimensions that are commonly
considered in the definitions and discussions of public and private higher education.

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The idea of multi-dimensions stems from the two factors. First, many of these
dimensions are commonly used in the discussion and definitions of public or private
HE. Therefore, it is important for us to encompass most of the commonly accepted
notions of public or private higher education. Second, the identification of these
dimensions is important in the designing of public policy options in relation to the
public-private mix of higher education. Careful analysis of different dimensions
would enable us to understand how different policy measures can be used in
order to achieve certain policy goals. For example, even if the most compelling
social objective is access to higher education, it does not necessarily mean that HE
should be provided by the government. Greater access can be achieved by the HES
with substantial private sector involvement as long as the cost to the end-user is
reasonable, say, by adequately increasing the number and quantum of need-based
financial aid or scholarships.
The most important dimensions of the public-private mix in HE that we identified
are:
1. Source of funding. How are the expenditures of the HEI funded?
2. Ownership. Who owns the institutions, i.e., who has the right to claim the residual
profit?
3. Autonomy. How much autonomy is granted to the institution in the management
of academic and administrative affairs?
4. For-profit or not-for-profit. To what extent the HEIs are seeking profits (regardless
of its legal standing of non-private organizations)?

3.1. Methods of Funding

Higher education institutions (HEI) are funded by a variety of ways depending on

the legal, political, and economic environment of a country in which the HEI is
operating. The proportion of government support and the modalities of financial
support to HEIs vary substantially across countries. Different levels of government
(central government, provincial/state governments, or local governments) may be
involved at various levels depending on a particular country. Also, government
funding can take various forms. First, HEIs can receive direct government
allocation. Sometimes the funds are limited to capital expenditures, while in
other instances all or some portion of operating expenditures are also covered.
In many cases, the allocation of government funds involves a complex political
process. Not only the amount of budget but also the way in which the budget
is determined can affect the efficiency and equity of the HES. In many cases,
the government supports HEIs indirectly. A common way is through government
grants distributed to institutions, schools, and individual professors. Sometimes,
the distribution is based on some kind of open competition, whereas in other
cases, it can be distributed by the discretion of the distributor who is in charge of
the fund.

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 Understanding the Public-Private Mix of Higher Education

The most obvious and widely used (private) funding of higher education activities
is tuitions and fees charged to the students. The reliance on student tuitions varies
widely across countries, sometimes among institutions within a country, and at times
within an institution where different programs may have differing charges. It is well
known that the cost of higher education increases rapidly through the development
process, faster than the rate of growth in per capita income. The wages and salaries
to the teaching staff account for the bulk of HE expenditure, and the productivity of
such teaching rises much slower than the industrial sector (such as manufacturing).
Therefore, without government support or substantial private donations, the cost to
students is likely to grow more rapidly than the rise in personal income.
Another important private funding source of HE is gifts by corporations,
philanthropic organizations, and individuals particularly alums of the HEIs. Again,
the amounts of private donations vary widely across countries and across institutions
within a country. The critical limitations of the private donation would be the supply.
Tax laws allowing philanthropic donations to HEIs may encourage the supply of
donation. Better college experiences, particularly residential campuses with strong
school identity, would encourage donations by alums. More organized professional
development efforts by the HEI may result in a greater donation. Indications of
better school governance and lack of institutional corruption would result in greater
donations. While institutional loyalty may be the major factor of private donations
for students, alums, and families, corporate donations may be motivated by the
value of public relations or corporate profits related to the gift. The last implies that
corporate donations may follow HEIs that are related to the corporation’s business
activities rather than pure altruistic motivations.

3.2. Ownership and Governance Structure

The ownership and governance structure of a HEI may be complex. When the HEI is
established by the government and the most of the capital and operational costs come
from the government, ownership and identity is clear; that is, it government-owned
and a public HEI. However, the government can be more than one entity. First,
there are different levels of government, i.e., central, provincial/state government, or
local government. Second, ministries in different sectors may establish an HEI. For
example, the Ministry of Agriculture, Telecommunication, Transportation, Science
and Technology may establish specialized universities. Therefore, there may be more
than one government entity involved in the operation of the HEI. In some countries,
the public ownerships sometimes are transferred from one branch of government to
another branch (of government) or from the government to a private, autonomous
governing body. For example, recently in Japan, the governing rights of many public
universities have been transferred from the Ministry of Education to independent
boards of trustees mimicking a privatization of public enterprises.
However, such privatization of HEIs is inevitably going to be more complicated
than that of a profit-seeking corporation, as various stakeholders of the HES,

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students, parents, faculty members, staffs and administrators will try to exert their
voices in the decision making process of the operation of the HEI. The prevalent
influence of stakeholders in and outside of the legislated governance system cannot
be avoided because of the following reasons. First, the choice of the governance
structure itself is a political process, and the resulting outcome would be also subject
to politics. In some cases, the board members are appointed by the government;
in other cases they are elected by voters through election; in still others, certain
stakeholders are given the authority to appoint predetermined number of board
members. Obviously the choice of the selection of the governance structure and
its board members would influence the incentive structure of the stakeholders and
thereby the operation of the HEI.
Even if certain groups of stakeholders are excluded from the legislated governance
structure, they may exert substantial influence through political pressure. For
example, students and/or faculty may protest the appointment of certain executives
or implementation of certain rules or policies that may be seen to have negative
consequences to them. In certain political environments, such protest may prove to
be a very effective veto to the existing governance structure.
The simplest ownership structure of a private HEI is a sole proprietorship, in
which a single person or an organization established the HEI. In this case, there is
seldom dispute about where the residual claim belongs. However, the life of the
HEI is typically longer than a natural person. Without clear transferable shares of
ownership, the ownership may be diluted to several family members or key top
executives over time. Therefore, in time even the clearest form of private ownership
may be faced with complexities. In this regard, the for-profit PHE is likely to retain
the clearest form of ownership over time.

3.3. Operational Autonomy

Independent of the ownership of a HEI or how the HEI is funded, the autonomy
in academic and administrative affairs can vary substantially across countries. For
example, even when the HEI is established by the private sector and majority of
the funding comes from tuition payments by students and/or private donations,
the HEI may be subject to a great deal of government regulation in academic and
administrative affairs, like the establishment of new programs, hiring and promotion
of academic and administrative staff, setting any student fees, number of students
to be admitted, and admission procedures. On the other hand, in some countries,
even though the HEI is a public institution, they are allowed to have a great deal of
operational autonomy.
It is a common understanding that privately owned HEIs are allowed to have a
greater autonomy than public HEIs. In a given country that may be true. However,
such an assumption could be misleading in cross-country comparisons. For example,
before 1995 reform, Korean HEIs in the private sector were heavily regulated

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by the government. Not only their tuition levels, but the number of students for
each department had to be approved by the government. Similarly, most of the
administrative and academic decisions had to be approved by the government.
Similarly in Pakistan the government heavily regulates most operational aspects of
private HEIs.
In some countries, notably in the U.S., the central government exerts very little
control over the HEIs. Virtually all private HEIs are self-regulated through regional
and professional accreditation agencies. The US regional accreditation agencies do
not attempt to impose any pre-set standards to the HEIs. Rather, they accredit the
HEI on the basis of institutional goals set out by the HEI itself using rather flexible
and subjective criteria. The natural consequence of this autonomy is a large degree
of diversity in terms of the size, institutional goals, academic programs, curricular,
and institutional governance structure.
In most countries, the central government regulates the academic and
administrative affairs to varying degrees. There are several rationales for government
regulation. First, the government may impose certain quality standards to the
provision of higher education. Since it is extremely difficult to determine the quality
of academic programs, governments usually use other indicators in the regulation
of HEIs, such as faculty-student ratio, minimum level of physical facilities, library
facilities or number of books, and so on.
Although, government regulation may help to establish certain quality control,
it may also have negative consequences. The creativity of individual initiatives by
faculty members, academic programs, or HEIs may be blocked so that the resulting
academic programs may be very uniform across HEIs. More importantly, the
regulators may not respond to the market need effectively so that the provision of
HE services may be very different from what students want.
A second reason of government regulation is to promote access to HE. Under a
total market provision of HE, it is likely that students from lower social economic
status would be priced out of HE market. The government may use its regulatory
power to increase access to such students. A commonly used mechanism is price
control, namely, lowering tuition costs than what might have prevailed in an openly
competitive market. Although such regulation is free in the sense that it does not cost
the government out of pocket expenditure, it may result in a very large social cost.
HEIs would face constraints to maintain quality of service provision when revenues
from student tuition are diminishing. When there are no HEIs that are not under the
government regulation, educational quality of all HEIs would be lowered. When
the HES is segmented between regulated and unregulated sectors, the quality of
the regulated sectors would be lower than that of the unregulated sector. As the
unregulated sector is likely to have higher tuitions than the regulated sector, the
system will have a duality with high quality-high cost institutions on the one hand
and lower quality-lower cost on the other. In short, the price control alone is not
likely to create the improved access to the students of lower SES.

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S. Kim

3.4. Institutional Goals

HEIs may have diverse private and public goals. Many not-for-profit private HEIs
do not seek for profits, but for reputations. When there are a variety of influential
stakeholders and no single proprietor, private HEIs may pursue higher reputation as
its principal institutional goal. In such instances, pursuit of reputation serves most
of stakeholders’ goals more effectively than the for-profit mode. For example, for
students getting the best education with the lowest cost may be the major goals;
for faculty, to teach and conduct research at the best institution (best students,
best research support, and best colleagues) with the highest salary would be the
major goals; for administrators, high salary with the best fringe benefits (not only
the personal fringe benefits such as pensions and medical insurances but also the
association with the university such as political connections, sports teams, and
power over the administrative staffs) would be the major goals; for alums, the best
connection to other successful and influential alums would be the major goals.
In some countries, for-profit HEIs are legally permitted. In such cases, they need
to compete with public and non-profit private HEIs. Therefore, they penetrate the
market in which HE demand is the highest and the cost of delivering such education
services are the lowest, such as business administration, information and technology
oriented disciplines. Disciplines in which either costs of delivery are very high
(such as medical schools) or demand is low (such as humanities) will not be usually
provided by for-profit HEIs unless they are able to recover the high cost through
high tuition fees.
In some countries, for-profit HEIs are not permitted by the law. However, as long
as there exists unmet demand for HE, non-profit HEIs may operate just like for-
profit HEIs. Some will use illegal mechanism to move the funds from the HEI to
the effective owners, as the incentive for profiteering is so great. In fact, corruption
in private HEIs in many developing countries where for-profit HEIs are not legally
permitted is a very serious issue.
Even in the environment in which for-profit HEIs are permitted, not all private
HEIs would become for-profit. Non-profit status may have an operational advantage
in the country’s tax code. The owner may have really an altruistic goal when s/he
started the institution. The longer the history and the larger the number of alums, the
political power of non-owner stake-holders (i.e., faculty members and students) who
are less interested in the institution’s profit may gain control over the institutions.
Not-for-profit HEIs may attract more private gifts.
For non-profit HEIs, survival would be the primary operational institutional
goal. When the long run sustainable survival is secure, then it needs to satisfy the
objectives of the stakeholders. Since different stakeholders may have conflicting
objectives, the HEI needs to have a functioning governance structure that can
handle such conflicts. Institutional goals will be determined through this process.
Therefore, the institutional goals for the individual HEI would very much depend
on the composition of the stakeholders and available resources. For example, a

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well-established HEI with a very large fiscal base (either with endowment,
donations, and/or high student tuition) that has to meet the demands for the various
stakeholders, the most likely institutional goal is to improve reputation, as it serves
the objectives of the majority of stakeholders. The pursuit of excellence is a noble
goal that appeals to virtually all stakeholders.
For a fiscally challenged HEI that needs to meet its financial obligation urgently,
securing the fiscal base would be higher in the agenda of the school administrators
and faculty. If this HEI is required to recruit students competitively, it has to focus
its energy to design and deliver programs that can attract more students. If there is
no pressure to recruit students (because students are assigned by the government),
the key decision makers have no incentive to attract more students and change the
academic programs by shifting the resources in order to meet their needs. In such
instances, the only predictable outcome is that the quality of education will be
lowered.
From the perspective of the policy-makers, such institutions are difficult to deal
with. When a for-profit organization is having major financial difficulties, market
forces will make it shut down or sold to other organization to be restructured by
merger and acquisition. However, the closure or radical restructuring may be
extremely traumatic to many stakeholders (e.g., students cannot finish their degrees,
faculty members lose their jobs) and is likely to become a political matter. Therefore
the HES allowing for-profit HEIs would be much more flexible in dealing with and
trying to mitigate the major financial difficulties of the private HEIs.

4. FUNCTIONS

There are many stakeholders in a nation’s HES: students, government, faculty,

research staffs, industry and the general public. Because of the multiple stakeholders,
the individual nation’s HES has several, sometimes conflicting functions. The
following is the list of the most recognized functions of HES. In contains not
only functions that HES serves to the private sector, but common motives of the
government intervention to HES. We will discuss their functions from more private
issues to public issues, respectively.

4.1. Instrument for Human Capital Accumulation: Teaching

The primary purpose of HEI is the education of students. HES covers the high end
of formal educational system and there is ample evidence that HE increases workers
life-long wage profile. Also, higher education seems to provide better information
on how to conduct life. For example, a more educated person is likely to live longer,
indicating that they are more aware of ways to live healthy life styles. Also, they tend
to enjoy a wider variety of cultural activities such as music, arts, and so on.
The primary mode of the accumulation of human capital at the higher education
level is through formal learning. Therefore, teaching/education is one of the most

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important functions of HEIs. Obviously, the primary beneficiary of teaching in

higher education is students, who are enabled to accumulate human capital and
utilize it in their future lives, whether in work or non-work related activities.
Domestically, the HES can serve as the reservoir for the highest level of human
resources within the nation. In a totalitarian regime, such a university would be a
haven for regime loyalists. The graduates of such an institution would serve on key
posts in the government and private sector. The networks built during the school
years or after graduation may serve as effective alternative communication channels
among the graduates. In a totalitarian nation, such value would be greater than in a
free nation. When the state is trying to catch up with the rest of the world, the strong
control of the state may benefit rapid accumulation of human capital. For example,
the Japanese Imperial universities in the 19th century were an effective mechanism
by which the state pursued the rapid technology transfer from more industrialized
Western nations.
HEIs can either be comprehensive or specialized. A comprehensive HEI, typically
with tens of thousands of students with hundreds or thousands of faculty members,
offer a wide spectrum of academic disciplines. On the other hand the specialized HEI
often has a narrow academic focus. Music conservatories, art schools sometimes
offer only a handful of programs with less that several hundred students. The size of
HEIs and their comprehensiveness of program offerings may vary depending on the
institution’s pedagogical approaches and their institutional history.
The recent rise in demand for education spills over to non-traditional students.
There are also more part-time students who pursue higher education while they
maintain full-time or part-time jobs. In developed countries, there are more returning
students, who return to HEI after participating in the labor market for some time.
Typically they dropped out of HES in their earlier try in higher education. Also,
many retired persons seek higher education in an attempt to broaden their intellectual
horizons. However to these people, it appears that such education is more of a
consumption activity rather than an investment activity.

4.2. Advancement of Human Knowledge: Research

Because of the nature of advanced knowledge, research activities are an important

function of HEIs. In the purest form, research is a public good, because the output
of research can be shared with others without any additional costs. However, in
order to promote innovation and new technology, research outputs can be patented
domestically and internationally. Therefore, a nation’s HES play a vital role in
providing such new technologies to the national economy.
As most modern research activities involve large teams of scholars and assistants,
research activities are closely linked to graduate education, training and learning
process for future researchers. Understandably graduate education (which has a
substantial portion of research component) is more expensive than undergraduate
education. The teaching staff for graduate education is usually better trained and

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consequently less widely available; their salary level is higher; they also need bigger
and more expensive libraries, laboratories and related facilities.
It would be possible that a particular developing nation or a particular smaller
HEI specializes in teaching, because it is less expensive to supply. The nation can
effectively import graduate education by sending their citizens to more developed
nations. However, many of such students decided to stay in the country where they
receive graduate educations because of higher salaries and better working and living
conditions. Such loss of talents are commonly called brain drain. If the nation is able
to recover some of the expatriated brain drain, it could be cheaper than try to provide
similar graduate education domestically.
Whether HEIs that primarily focus on teaching are universities in the real sense
is an ongoing debate. One view is that research activities should be separated from
teaching activities as that would free up the time of highly skilled researchers. The
opposing view is that when the same person who is involved in research and the
creation of knowledge also interacts with students, they (the students) receive a
much richer content as well as draw inspiration for conducting research in their own
right. In some countries, such as in China and Germany, research activities are more
concentrated in research centers rather than universities. In the Anglo-Saxon world,
it is more common that teaching and research activities are more closely linked such
that the same faculty teaches undergraduate and graduate students, while conducting
research with some of their graduate students. In much of the developing world both
teaching and research may be weak. In certain instances, like Pakistan, HEIs aimed
at being research institutions, but in aiming higher than their capacities merited, even
teaching suffered.

4.3. Promotion of Social Mobility

Another important function of the HES is its ability to provide upward social mobility
for less privileged groups. It is well known that the premium on college education
in the labor market is substantial, and maybe increasing despite the massification of
higher education. For the children of poor households, therefore, college education
can be an important stepping stone for upward social mobility. In fact, the common
public policy goal of expansion of higher education is closed linked to the belief that
opening up higher education to the mass will increase social mobility.
However, it is also known that enrolment and success in higher education is
closely related to the students’ family background. Even if the HEIs are heavily
subsidized by the government so that user fees are kept to a minimum, students from
well-off families are much more likely to enroll in HEIs and successfully complete
the programs.
The increase in social mobility via HE may differ from country to country. It may
depend on the degree of social stratification and equality of opportunity in the job
market as well as the access and educational opportunity. When the country has a
stable political system in which the current degree of social mobility is taken to be

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acceptable to most of its members, promotion of social mobility through HE may

not be an important public policy objective. However, when the nation is under a
great stress due to the polarization among various social groups, then its unity and
the stability may crucially depend on how the HES functions in meeting the demand
for social mobility and cohesion.

4.4. National Pride and Preservation of National Identity

Sometimes national pride is a compelling motivation for a state to intervene directly in

higher education. When there is a benefit of creating a national intellectual symbol that
unifies and symbolizes the pride and strength of a nation, the state can be an effective
player to create such an institution. The idea is to build a national flagship university
or a system of universities that gets a preferential treatment by the government in terms
of resource allocation, prestige, and status of academic personnel. The state can be
the financier, the institution builder, and/or operator of such an institution. Depending
on the audience, such public universities can serve both international and domestic
audiences. National Singapore University in the city state Singapore is an example,
that the state effectively created a prized national symbol through the University.
Internationally, such a national university is an elitist approach to national pride,
just as the national soccer team for the World Cup, or Olympic team are to the
general mass. Particularly, when a nation is in need to project a positive image, the
state wants to create or develop such a flagship university. The push for the world-
class research university in China is an example of government intervention in the
HES. The value of such institutions would be difficult to estimate.
However, it is clear that such institution would benefit the national economy.
First, the international fame may give foreigners some degree of confidence in
commercial dealing with the nation. Foreign investors may feel more secure when
there are well functioning universities in the host country that can provide human
resources for employment and research and development support for the company’s
operation. In this regard, the value of a flagship national university may be relatively
high for a less developed nation.
Second, the nation’s top science and engineering universities may contribute to
the security of the nation by providing esoteric and non-marketable information that
are useful in military applications. Cutting-edge military technologies are difficult
to transfer. In many cases, the provision of adequate national security may be rather
expensive and vulnerable if the key military technology depends on foreign nations.
Certainly, the development of such military capability may be generated through
more specialized military training and research institutions. However, it would be
difficult to imagine that the level of technical sophistication does not depend on the
quality of the general HEIs.
Most importantly such a flagship institution can have an overall positive impact
on the HES and other HEIs through a demonstration effect. However, the depth
and breadth of such an impact is a function of a multiplicity of variables and

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there are instances where such attempts failed and ended up wasting considerable
resources.

4.5. Academe-Industry Cooperation: Tools for Regional Growth and Development

Recently, there has been some recognition that regional development can be more
effectively pursued if innovation clusters are formed between local universities,
local government, and local firms to cooperate in their needs for education, research
and regional economic development (e.g., OECD/IMHE). Based on this argument,
many countries attempt to use provincial (often public) universities as a tool for
revitalizing the regional economy in which the universities are located.
It is true that many well-known regional innovation clusters in the world involve
HEIs in those regions. The cooperation between firms and university research centers
are typically very active in those regions. However, it is not clear how useful the
regional innovation cluster idea is in terms of regional development policy. In other
words, it is not clear what the government should do to create a regional innovation
cluster, and how much the government policy be effective in achieving the goal.

5. EVALUATION CRITERIA

Although there may be substantial differences in HESs across countries in terms

of their accepted functions and their socio-economic context, the following three
criteria are useful in evaluating them and suggesting policy directions in order to
improve the system. The three criteria are effectiveness, efficiency and equity, and
we shall discuss them in more detail below.

5.1. Effectiveness

Effectiveness is how much any HES fulfill its stated mission, as explained earlier
in their “functions.” Nowadays, many observers consider that the most important
mission of an HES in democratic societies is how well it produces academic and
research excellence. The reason for the importance of excellence is evident. As HES
plays a key instrument for the accumulation and advancement of knowledge, the
HES’s ability to generate new knowledge and transmit it to later generations is very
important. With the advancement of knowledge-based economy and winner-takes-
all societies, scientific and engineering excellence is the key engine of economic
growth. In this regard, HES’s contribution cannot be over-stated, since it can provide
not only basic research but can be a cradle for development of new products and
processes.
Are there any economic gains to have HES that includes centers of excellence?
Although knowledge can be transmitted without much cost, advanced standing in
science and technology of a particular nation can be of enormous economic benefit
to its citizens. The products that embody better technology can command higher

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prices, larger market share and better profitability. Proprietary technology can earn
substantial royalty. The firms that produce such products need a workforce that is
well-educated and well-trained.
What matters is the level of excellence of the best HEIs in the country rather than
the average excellence of the all HEIs. The best HEIs performance determines level
of excellence of the state of art, science and technology. Therefore, it is important
whether the nation’s best HEIs can attract, train, and retain the best talents.
The level of excellence, therefore, is determined by the level of research activities
rather than the level of teaching in the HEIs. Certainly, teaching and research
components are well integrated within the operation of HES. However, research is
the more expensive part of the institution’s mission, and more difficult to nurture. In
order to be a center of excellence in research, it needs to have superior faculty, good
graduate program that attracts top talents from around the world to stimulate and
help the faculty’s research, and funds that support their activities.
Besides the excellence in teaching and research, the HES should be evaluated
from the perspective of other socio-economic goals such as the promotion of social
mobility, social cohesion, national pride and regional development policy instrument.

5.2. Efficiency

Efficiency is often a misunderstood and abused term. The fundamental reason for
that is that the term ‘efficiency’ contains several different aspects, and often those
(different aspects) are not clearly stated when the term is used. Below, we would like
to clarify three separate notions of efficiency in the discussion of education.

a) Production efficiency:  The idea of production efficiency refers to the condition

that the HES delivers a prescribed level of educational service with the lowest
possible cost. For example, if two different school systems (A and B) deliver identical
levels of educational services, but A costs less than B, we may say B is less efficient
than A. If there is no other educational system that delivers the same service level as
in A while costing less than A, we say the system A has production efficiency.
The first condition for production efficiency is whether all the factors of
production in education are fully utilized. When the equipments purchased are not
properly utilized because of the lack of properly trained personnel, the production
efficiency is not reached. When teachers do not fully exert their energy in teaching
and shirk from their jobs, production efficiency is not achieved. The level of
utilization of faculty and physical resources will depend on the incentive structure of
the HEI. For example, if the faculty members are rewarded without any regards to
their teaching and academic output, it would be difficult to expect that the teaching
and research outputs would be of great value. Similarly, if the top executives of the
HEIs have motivations that are not aligned to the mission of the HEI, it would be
difficult to expect the resulting performance of the HEI to be high. The violation

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of this condition may arise most often due to the lax supervision of the teaching
personnel, misguided incentive system, or poor management system.
Secondly, production efficiency is determined by the choice of combination of
inputs and whether all its elements are optimally utilized. The amount of factors
used should reflect the true resource cost (shadow price) of the factors. For example,
consider the case in which education service can be produced by the use of teachers
and equipment. When teachers are more expensive compared to equipment, it is
optimal to use lesser teachers and more equipment by substituting more expensive
teachers with less expensive equipment. The violation of this condition often arises
due to the market distortion created by misdirected policy initiatives.

b) Consumption efficiency (Delivery efficiency):  The second criterion of efficiency

deals with the question whether willing and able education consumers are actually
able to receive the education that they desire. In other words, if all the students
who are able to pay the required expenses and finish the program successfully are
not able to enroll the program, the HES is not consumption efficient. In short, if
the school system does not meet the education demand of the consumers, it is not
consumption efficient.
Since education demand may be quite diverse across individual students with
different abilities, aspirations, and family backgrounds, bureaucratically oriented
central provision of education may not meet the diverse demands. For example,
high ability students with high aspiration may not be satisfied with the low quality
educational services provided by the government. Students with special needs (e.g.,
learning disability, physical handicap, and so on) may have non-traditional education
needs that may not be satisfied by the conventional schools.
It is not difficult to understand why centralized education systems tend to be less
responsive to diverse educational demands, and therefore, will not be consumption
efficient. The centralized system tends to provide uniform services across different
regions with different cultures and languages, across different socio-economic
statuses (that may demand very different types of education), and across different
abilities. Decentralized systems have a definite advantage in meeting such diverse
demands. In particular, for-profit private education providers would be much more
sensitive to the unmet market demands for special education needs.

c) Investment efficiency:  Investment efficiency refers to the question whether the

benefit of education warrants the cost of providing it. This concept of efficiency
determines whether or not there is too much or too little investment in education. In
the discussion of investment efficiency, it is critical to consider the difference between
the private return on education and the social return on education. Private return on
education is the benefit of education attributable to the individual who received the
education, whereas social return on education includes the indirect benefits accrued
to other members of the society as well. In almost all cases, private cost of education
differs from social cost of education, because the government typically provides

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subsidy for the latter. In this case, private cost refers to the out-of-pocket cost paid
directly by the individual, whereas social cost includes the government subsidy as
well. Similarly, private benefit of education refers to the benefits accrued to the
individual, whereas social benefit refers to the benefits to all members of the society.
One can divide investment efficiency into two different aspects. The first is
the decision over investment in education versus investment in other productive
activities, say, physical capital. If the current return in education investment is
greater than the return on physical capital, the investment in education needs to
be increased. In other words, education is under-invested. On the other hand, if
the return in education is lower than other productive activities, there is an over-
investment in education.
The second criterion for investment efficiency deals with the allocation of
resources within the education sector, i.e., primary, secondary, higher, and adult
education. The investment efficiency within the education sector implies that the
returns to education investment in the sub-sectors must be equal to one another. For
example, if the return on education in primary education is greater than the return on
in higher education, resources must be shifted from the low return higher education
to the high return primary education sector in order to achieve the within education
sector investment efficiency criterion.
It needs to be recognized that there might be a divergence in the rate of return
in education of an individual may be different from that of the whole society. It
stems from the fact that private benefits/costs of education are different from those
of social benefits/costs. Also, the rate of return may change over time. For example,
if there is a substantial increase in the supply of educated workers, the wage for the
educated workers will decline. Consequently, the rate of return in education will be
lower than previously estimated.

5.3. Equity

Equity is another primary concern in an education system. In many cases, substantial

government initiatives in funding and provision of education are justified on the basis
of equity. However, as in the case of efficiency, discussion on equity in education
is often confused, because there are multiple commonly used concepts of equity in
education.

a) Equal opportunity:  One of the most common notions of equity is the concept
of equal opportunity. As the primary theoretical construct, it appears to be both
satisfactory to conservatives as well as progressives. However, there may be serious
confusion regarding what constitutes equal opportunity. For the conservatives
and libertarians, the doctrine seems to emphasize individual responsibility. Given
the opportunity, it is the student who should be responsible to take advantage of
the opportunities provided by the system. In an extreme conservative version,
equal opportunity can be understood as lassies-faire. In other words, as long as

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there is no apparent discrimination among social groups, any difference in access

and performance across students are students’ responsibilities. In a more modest
version, equal opportunity may mean equal access to a given educational system.
For example, if the education system has a selective entrance examination for elite
universities but the entrance examination is open to any student, then there is equal
opportunity. However, better prepared, academically stronger students, a greater
proportion of who are likely to come from families with higher socio-economic
status, have much greater chance of being admitted to such universities. This may
not be regarded as equal opportunities by the progressives.
For the extreme progressives, equal opportunity means that equal educational
outcome of all. In other words, everyone in society should have an equal level of
preparedness, before they compete for educational advancement. Since education
is a vital element of human capital, the notion of equal opportunity for the most
progressives is similar to the state’s guarantee to equal educational outcome.
Equal opportunity may mean somewhere in between the above two notions.
Because it would be difficult to convince the extreme positions, many compromises
to equal educational inputs for every student as a surrogate public policy for the goal
of equal opportunity. However, even though the government distributes the same
amount of resources to every student, the educational outcome would not be the
same across students. First, each student’s ability are different, therefore the resulting
outcome would be different. Second, there is a discrepancy in family resources and
their willingness to put the resources into education. Such supplementary resources
spent by the student’s family may greatly affect the educational outcome. Therefore,
the total (private as well as public) amount of resources invested in education would
be different, resulting in different educational outcome.

b) Access:  For many countries, another prominent equity concern of HES has been
the promotion of access to higher education. The key underlying assumptions for
increasing the access is that improving the access would increase the welfare of the
under-privileged social group. However, such assumption may not be validated by
the following reasons.
First, it is well known that public support for HE typically benefits upper and
middle income class students, because the participation rate for HE by low income
students are generally low, even in the developed countries. Therefore, any attempts
to increase access tend to benefit the upper and middle class students more than
low income students. Second, even if the access were improved for lower income
students, their workplace condition and general welfare level may not improve,
because they tend to attend low-end institutions such as community colleges and open
universities. Also, sudden increase of HE graduates without any increase in demands
for labor for such workers may depress their wages. Therefore, the increased access
may not result in any concrete improvements in labor market performances for them.
There are a variety of ways to promote access. The government may subsidize
the operation of the HEIs. There is neither logical nor practical connection that the

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direct operation of HEIs by the government improves the equity goal. However,
the public provision of HE with public subsidy (i.e., the provider does not recover
the full cost of operation), may be the cheapest and easiest way in providing
access to the poor, when the lack of social infrastructure prevents the government
in providing selective subsidy directly to the educational consumers. In order to
provide cash subsidy (for education), the state should be able to select and verify the
income levels of the students, and when there is no social infrastructure to perform
that function, it is more cost effective that the government provide the service at a
subsidized price. Although the subsidized price to all students (regardless of their
socioeconomic status) may in effect give substantial subsidy to the un-deserving
population, it may be indeed the cheapest way to provide service to the poorest.
There are two reasons why the poor students are not likely to be able to attend a
HEI and realize their full potential. The first is the liquidity constraint. That is, they
will not be able to borrow the cost of attending HEIs in the financial market because
of the imperfection of the financial market. Second, even if the market is perfect so
that any deserving students are able to secure educational loans, risk aversion of the
student may prevent the student to take the loan. Therefore, any direct loan programs
should be aware of the two aspects simultaneously. It is important to recognize that
since the subsidy to HES tends to be regressive, the right criterion to evaluate the
HES is not how cheap the tuition is or how accessible that HES is, but how successful
the HES provides access to the students from poor backgrounds.

6. CONCLUSIONS

Virtually in all countries, higher education system is a mix of public and private sector
operation. However, as we have described in this chapter, the typical dichotomy is
not very clear and subject to arbitrary distinction. Such dichotomy is often irrelevant
and misleading in evaluating the functionality of the system or and designing policy
alternatives to improve the system. The CDFE (Context-Dimensions-Function-
Evaluation) model proposed here is a comprehensive framework to perform such
exercises.
The model is designed based on the belief that the nation’s HES is a historical
product of complex interplay between the politics, economics, and social changes
in which it is supposed to function. Therefore, the context of HES is as important
as the internal working of the system itself. Also, the public-private distinction is
multi-dimensional, and the various dimensions of publicness (or privateness), such
as financing and governance, need to be considered. The function of HES system
may differ across countries, and such difference may result in different policy
directions. Despite of the diversity and idiosyncrasy of the HES across countries,
common criteria of evaluation are possible. The three E’s (Effectiveness, Efficiency,
and Equity) can be universally accepted for policy makers across countries, even
though the relative weights of each criterion may differ.

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The model will be particularly useful in discussing any policy changes in HES.
Policy changes in HES will inevitably create complex ripple effect throughout the
system. A comprehensive evaluation with a set of fixed criteria would be necessary
to decide whether the policy change would create a positive overall outcome. As the
HES is composed of conflicting interests of various stakeholders, it would be rare
that any policy change would be welcome to all stakeholders. The CDFE model
would articulate the positive and negative effects to all stakeholders with a set of
universal and acceptable evaluation criteria to the system.
The model will also be useful in comparing the HES across countries. The
HES of a particular country is a result of complex interplay of the nation’s history,
politics, and economic system. Typically any comparative analyses are motivated
by the desires to learn from each other’s experience in making improvements of
the domestic system. In this regard, the combination of comprehensive look of the
idiosyncratic systems with a common set of acceptable evaluation criteria would be
an important advantage in such analyses.

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 PART II
CHANGING PUBLIC-PRIVATE MIX IN
HIGHER EDUCATION
National and Regional Trends in a Comparative Perspective
 ZULFIQAR GILANI

4. PUBLIC-PRIVATE MIX IN HIGHER

EDUCATION IN PAKISTAN
An Overview

1. INTRODUCTION

Pakistan inherited its educational system from the British, who introduced
modern school education in India primarily to produce lower administrative staff
from amongst the indigenous population. Higher positions of governance and
management were occupied by their own or anglicized Indians who received higher
education from their (British) universities. The hallmark of the system was its elite
nature, embedded in an undemocratic and non-egalitarian governance regime.
The situation has not change much since the attainment of independence in 1947.
Education, especially higher education, remains largely for the elite, as the bulk of
the population is illiterate or with very weak schooling. Most of the few from outside
the elite who receive high school education cannot afford to obtain higher education
because of financial or social constraints.
At the time of independence there were two universities in Pakistan and
expansion was slow till the end of the century. Besides the small numbers, institutions
of higher learning did not develop the important role of becoming centers of
scholarship and knowledge-creation through advanced research. Neither were their
programs and curricula have much congruence with the needs of the labor market
or society.
Starting the late 20th century the demand for higher education rose rapidly in
Pakistan and continues. A number of somewhat self-evident factors have contributed
to this: A sharp increase in population; increasing literacy rates and larger numbers
completing higher secondary school education; and most importantly shifts in the
economy and the labor market towards knowledge-based skills. With increasing
demand for higher education and emergence of new areas and methods of study;
the pressures increased on the government for rethinking policy, providing greater
financial and academic inputs, increasing access, as well as modernization and
reforms of systems of governance and management of institutions of higher learning.
The traditional bureaucratic machineries, planning and governance capacities, and
the weak financial position of the government were not adequate to cope with the
changing demands. This resulted in an overall decline in the education sector and the
emergence of private providers.

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With a slow start in the 1980’s, the private providers started to enter the market,
and in the new millennium there has been a veritable boom in the establishment
of universities and degree granting institutions both in the public and private
sectors Pakistan. The increase in the number of institutions has raised a number of
challenges. For example, the issue of quality and relevance of the education being
provided is a central one. The rapid increase overloaded the system that was weak
to begin with, thus overwhelming policy-making and planning. It created shortage
of a properly trained professoriate or management and administration, which
was anyhow a weakness. The rapid expansion of the sector inevitably resulted in
numerous changes, especially over the past about four years. However, the changes
and policy responses to the new needs have been largely unplanned. The sector as a
whole still has to stabilize and core benchmarks in policy, institutional functioning,
and quality has yet to emerge. The challenges and difficulties that higher education
is encountering are part and parcel of the overall (downward) trajectory of the
country, especially in the social sectors. The crucial gaps are in vision, purpose,
policy, planning, and political will.
Despite the expansion, enrolments in institutions of higher education continue
to be extremely low and the private institutions cater to a very small minority of
the students receiving higher education. Finally, education in general, but higher
education in particular, has been differentially available to various sections of society
and issues of access and equity bedevil the sector.

2. CONTEXT

Pakistan has been lagging in the social sectors. According to the UNDP report
of 2003, Pakistan ranked 135 amongst 177 countries with a human development
index value of 0.527. Literacy level in the country for 2005–06 was 53%. However,
Pakistan has one of the lowest enrolment ratios in higher education in the world. Of
the total of 12,807,395 Pakistanis between the age of 17 and 23, only 3.3 percent
(423,236) are enrolled in institutions of higher education (CHET, 2006).
Pakistan has a turbulent political history, with the unfortunate hallmark of absence
of democracy, barring very short periods. Over time, the state and its agencies,
especially the military, have acquired a dominating presence. The rather sharp divide
between the state and civil society has gotten entrenched, and also gets its expression
in the public-private divide in education. The state is highly centralized in all its
mechanisms. The nature and functioning of government is germane, as the bulk of
higher education is still being provided by institutions in the public sector and even
the private sector institutions are controlled by the government. In a word the public
sector as a whole does not demonstrate good governance and as a result efficiency
and productivity are hampered.
Currently there are four types of institutions that provide higher education,
Universities, Degree Granting Institutions, and affiliated institutions like Colleges
and Institutes. The first two are granted charters, depending on location, by the

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respective provincial governments, of which there are four; or by the government of

Azad Jammu and Kashmir if located there; or by the federal government if located in
the Islamabad Capital Territory.1 Education is a line department of government and
suffers similar ills. The bureaucracy is in the driving seat and the chief bureaucrat of
education in is the Secretary Education. This office has a key role in all of education,
including colleges and public sector universities. It has a lot of authority and power,
without much responsibility or accountability. The professional or the technocrat is
ignored in governance matters. The British colonial masters set up a system over
150 years ago to serve certain purposes, times have changed, the purposes have
ostensibly changed, but the governance patterns and approaches have changed very
little, if at all.

3. POLICY: HISTORICAL EVOLUTION

There have been numerous education policies in Pakistan. For purposes of analysis,
they can be divided into three distinct phases, each briefly examined below.

First Phase 1947–1973:  Immediately after independence, a Pakistan Educational

Conference was convened between November 27, and December 1, 1947 at Karachi.
The Conference called for scientific and technical education in order to build the
future economic life of the country, and to instil in the people the highest sense of
honor, integrity, responsibility and selfless service to the nation. This Conference
had a specific agenda and took a management approach, ignoring larger issues of
higher education. Another conference was organized in 1951, and subsequently the
Education Division of the Central Government in collaboration with the provinces
prepared the Six-Year National Plan for educational development. The Plan proved
to be unworkable as it ignored the prevailing socio-economic realities, including:
large-scale influx of refugees from India, paucity of state resources; lack of
coordination amongst provinces and with the Centre; and urgency to build other
necessary infrastructure for the new state (Isani et al., 2003).
In December 1959 a National Commission on Education reviewed the situation
to evolve a national system which would reflect “the spiritual, moral and cultural
values of independent Pakistan, and enable the system to meet the growing needs
of the nation in the fields of agricultural, scientific and technological development.”
(Ministry of Education, 2002). The Commission emphasized that higher education
must be concerned with formation and development of character along with
acquisition of knowledge. Celebrated for its exhaustive analysis the recommendations
of the Commission received neither sufficient funds nor the necessary political will
for implementation.
The tradition of unimplemented policies continued with two subsequent
ones announced in 1970 and 1972. The New Education Policy of 1970 regarded
educational development as a dynamic and continuous process, which implied an
evolutionary exercise and periodic appraisals of policy and programs on the part

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of the State, the community, and all others concerned with it. The policy stumbled
on the political upheaval of 1971 and the change in government (The eastern
wing of Pakistan broke away in December 1971 and became Bangladesh). The
Education Policy of 1972 made recommendations similar to the New Education
Policy of 1970, within the radical contextual difference of nationalization. Two
major changes marked the end of this first phase of stuttering attempts to build a
higher education sector in Pakistan. First, was the establishment of a University
Grants Commission (UGC), which had two key roles: Securing adequate funds for
universities and helping in an objective assessment of their requirements. Neither
role was fulfilled effectively or efficiently. Second, the policy replaced the earlier
‘ill-famed’ University Ordinances with supposedly ‘enlightened and progressive’
legislation to democratize university functioning. In practice the new legislation
proved to be more authoritarian, more obstructive and even more ‘ill-famed’ than
the previous one.

Second Phase 1973–2002:  Between 1973 and 2002 higher education remained
a major theme in the three education policies announced in 1979, 1992 and 1998,
and in the numerous five-year plans. This period witnessed an enormous physical
expansion, accompanied by an equally large decline in quality, relevance and
reputation of the higher education sector.
A significant development was that starting the early 1980s, the private sector
was encouraged to set up high quality institutions, especially at the primary and
secondary school levels. At the same time recognition was given to Deeni Sanad
(Religious Certificate) of Madrasas (religious seminaries) as equivalent to
University Masters degree to enable the graduates to seek employment in the formal
sector. This policy in effect led to the operation of dual system of education in the
country, one for the elite and another for the rest of the country. Allocations to higher
education also declined in this period.
The 1992 National Education Policy aimed to restructure the existing educational
system on modern lines, and to bring a social change purportedly as dictated by
the teachings of Islam. It emphasized a shift from supply to demand-oriented study
programs, and placed a heavy premium upon research, community participation,
and student discipline. The National Educational Policy 1998–2010 recognized
the unprecedented demand for higher education in Pakistan, identified several
challenges, including the continuing complaint of a tilt towards arts education, and
laid down several reform targets. A year and a half after the policy was announced,
the government was replaced by a military coup.
The Musharraf-led military government took a number of steps to address the
situation of higher education in the country, including producing a comprehensive
document entitled Education Sector Reforms: Strategic Plan 2001–2004. This
document envisioned expanding access to higher education to at least 5% by 2004,
financing the shift to science and technology, changing the enrolment ratio of arts
and science from 70:30 to 50:50, improving the quality of students through merit and

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of teachers through faculty development, and having a strict regulatory mechanism

for quality control of higher education. However, once donor funding was obtained,
basically for primary education, the Strategic Plan was quietly dropped from public
view and higher education was taken over by the Higher Education Commission
(HEC) in late 2002.
Three features characterized this phase of higher education policy in the country.
First, the rampage of unconcerned policy makers playing havoc with policies
continued unabated, and perhaps became worse, as even the trappings of political
will were gradually discarded in favor of an unapologetic grabbing of power and
resources. Second, an unprecedented number of new universities were established,
with quality and purpose of education diving proportionately. Third, the new
millennium brought a new paradigm shift with the establishment of two task forces
and the formation of the HEC.

Third Phase: 2002–Present:  In early 2000’s there was an evident shift in the higher
education sector, globally and nationally. Globally, the report of the UNESCO/ World
Bank Task Force, ‘Higher Education in Developing Countries: Peril and Promise’
re-emphasized higher education in a knowledge-based economy. The launch of the
report in Pakistan in early 2001 triggered the Government to recognize that the sector
was an engine for economic development, and prompted the formation of a systematic
effort to reform higher education in the country. Consequently, the Government of
Pakistan initiated a reform plan by establishing a Task Force in 2001. The Task Force
through extensive research and consultations defined the context of Pakistani higher
education, identified the key reform areas and gave recommendations to address
the situation. The recommendations of the Task Force acted as a leading edge for a
proactive policy for higher education reform. Flowing from a major recommendation
of the Task Force, the Steering Committee on Higher Education was formed in early
2002, with the purpose of developing an implementation plan for higher education
reform in the country. The Task Force also recommended the establishment of the
HEC, a central body that would facilitate quality assurance of higher education in
both the public and private sectors and link funding by the Federal Government for
public universities to performance. The HEC was to replace the University Grants
Commission.
In fact, however, neither the Task Force nor the Steering Committee could
make much headway beyond successfully advocating for an increase in financial
allocation to higher education. The HEC took complete control of all developments
in the sector, randomly picked some of the recommendations and rejected most, and
established itself as the first and only recourse for determining standards, assuring
quality assurance, releasing funds, establishing and dis-establishing universities,
and implementing unilateral projects. More importantly there was almost complete
deviation from the spirit and philosophy on which the analyses and recommendations
of the Task Force and the SCHE were based. This was starkly evident in the centralized
and top-down implementation approach adopted by the HEC that continues to erode

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Z. Gilani

the autonomy of universities. Some have argued that this is better understood in the
context of political and bureaucratic realities of Pakistan.

Higher Education Commission (HEC):  From a higher education policy perspective,

the Higher Education Commission has a key position and role. The Government
of Pakistan established it by ordinance in 2002 to facilitate the transfer of funds
from the federal government to universities and their development and quality
enhancement. The mandate of the HEC encompasses all degree granting universities
and institutions, public and private, including degree-granting colleges. It works
to support quality education in these institutions by facilitating and coordinating
self-assessment of academic programs and their external review by national and
international experts. The HEC also supervises the planning, development and
accreditation of public and private sector institutions of higher education.2
Prior to 2002, the University Grant Commission (UGC) was the central body
responsible for coordinating higher education in the country. The UGC Act of 1974,
repealed by Higher Education Commission Ordinance 2002, primarily mandated
the body to channel funds to the public sector universities and it did very little else.
The HEC has been given far greater powers to determine minimum standards and
even determine a portion of university funding by performance. Control over regular
federal government grants for recurring and development costs is a key tool for the
HEC, combined with the power to allocate unprecedented levels of project funding.
In the public sector, the government allocations to higher education have witnessed
an increase of over 1500% in 2005–06.3 The reform steps taken by HEC to utilize
this increased funding has increased opportunities for improvement manifold, but has
also raised significant challenges and posed fundamental questions. The availability of
greater funding seems to have advanced the ‘brick and mortar’ and infrastructure, but
is largely leaving the weak institutional systems and human capacities unaddressed.
That is, the operative archaic systems and procedures and the unavailability of
adequately trained and competent human resources continue to bedevil institutions of
higher learning. These procedures and systems are complex, some tracing to before
the formation of the UGC, some to the time of the UGC, and new ones since the
formation of HEC, broadly corresponding to three policy phases in higher education
in Pakistan.

4. GOVERNANCE AND MANAGEMENT OF HIGHER

EDUCATION INSTITUTIONS

All universities in the Provinces, whether in the public or private sector, receive
charters from their respective provincial governments, constituting them as corporate
bodies and outlining their powers and responsibilities. One primary difference
between the public and private institutions is that the former are accountable to
government officials: For example the Chancellor of all public sector universities
is the Governor of the Province, and for Federal Universities the President has

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that role; and in their main governing bodies there is considerable representation
of federal and provincial government/s officials. The private sector universities
are accountable to governing bodies defined in their charters. Another important
difference is that the government provides funding for the public sector universities,
while the private ones have to have independent sources.
Public sector universities are largely modelled on a template charter that
determines a broadly uniform governance structure. The structure centers on four
bodies: The Senate (Not present in universities that came into being after 1980),
the Syndicate, the Academic Council and the Selection Board. The principal
officers are the Chancellor, Vice-Chancellor, Registrar, Director Finance (or
Treasurer), Controller of Examinations, Principals of Constituent Colleges (if any),
Deans of Faculties, and Heads of Departments (CHET, 2005). The apex body in
cases where it exists is the Senate, which is chaired by the Chancellor. It passes
resolutions on the revised budget and the annual report. However, its major function
is the approval, or otherwise, of any changes in the Statutes. The Senate usually
has more than 100 members. The Syndicate is the executive body of the university,
responsible for all matters except for changes in statutes. It has roughly about 20
members, one third of those are ex-officio, and the others are either elected by faculty
members or appointed by the Chancellor. The members include a representative of
the Parliament. The Academic Council again is a large body and usually has over
100 members and considers all academic and curricular matters. Chaired by the
VC, it comprises some senior management staff, Deans, department heads, full
professors, Librarian, elected faculty representatives, Chancellor’s nominees, and
representatives of colleges.
Administratively the structures of higher education institutions are centralized
and hierarchical, which are of a kind with the overall societal patterns. For the
public sector institutions, the top in this hierarchy is the Chancellor, who is also
the Governor of the province, or in the case of federal universities, the President
of the country. The next in the hierarchy, is the Vice Chancellor, appointed by the
Chancellor and serving at his pleasure. The Vice Chancellor is the chief executive
and academic officer of the University. He heads and chairs various academic
and administrative bodies of the university. The apex body for administrative and
establishment functions is the Syndicate, chaired by the Vice Chancellor. It has
wide-ranging powers, including senior appointments and most administrative
and financial matters. It is also the final approving body of the recommendations
of the Selection Board, the Finance and Planning Committee, and the Academic
Council.

5. ACADEMIC

We will briefly touch upon two academic areas, research and teaching, as they are
the backbone of higher education institutions. Research is of increasing importance
within the rising knowledge economy through which a state cannot only generate

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Z. Gilani

new knowledge but also engage in scholarly and scientific commerce with other
nations (World Bank, 2002). Basic research and fundamental knowledge thrive
where new findings are widely shared and are available to testing or refinement
either in the form of citations or international publications. Universities must form
practices that are conducive for research. Forming close links between research and
teaching, along with an ideologically neutral selection of research topics and peer
reviews, can provide basis for strong and effective research.
In Pakistan, both public and private universities are generally not structured to
undertake quality research or inculcate research habits and talents in students. By
and large there is either a low level of critically new research in universities or,
due to policy requirements, a spate of low quality research publications. Critical
components for a research environment do not exist in most cases: libraries are
not stocked with up-to-date books, journals, research papers, and citation indices;
laboratories are generally not equipped with adequate materials or instruments;
research quality and relevance mechanisms are not functional; funding is either
non-existent or severely limited; quality research is not incentivized; international
contacts and linkages are rare, partly due to funding restrictions; and, most of all,
the faculty member is disabled by ridiculously low salaries and inadequate time for
research.
A strong research system at the national level opens up the possibility that
substantial additional public benefits can be realized through international links.
International involvement can help the country guard against parochialism and
remain open to broader economic, intellectual, technical and social possibilities.
However, Pakistan’s rating in research remains pitifully low internationally, barring
a few specializations in the natural sciences.
Faculty constitute the most important element in the structure of higher
education institutions. University faculty represent an investment of at least 16
years of education, and are leaders and potential role models in their respective
disciplines. The need to attract, retain and incentivize high quality teaching, in
line with national goals, is axiomatic. However, there is a dire shortage of expert
faculty in the country. Because of low salaries and social standing, the best rarely
opt for academia as the career of choice. More often than not, individuals who have
failed to gain entry in the more desirable areas like the civil or military services,
or professions like engineering, medicine, banking, or law, join the professoriate.
Thus by and large faculty has weak intellectual strengths, commitment, and
motivation. The number of faculty having a doctoral degree is quite small. This
limits the supervision available for a large majority of students enrolled in higher
education institutions. Table 4.1 shows the academic credentials of faculty in
both the public and private institutions. It is fairly clear that there are not enough
properly qualified faculty members to provide good quality teaching and/or research
support.
Because of low salaries and social status, academic positions faculty members are
pushed to either moonlight or neglect their official duties.

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Table 4.1. Full-time faculty members classified by academic qualification

Sector Bachelors Masters Masters (Honors) M. Phil Ph. D. PGD

Distance Learning 9 110 0 22 41 182

Public 1059 4525 1319 1019 2549 10471
Private 1151 1480 508 284 540 3963
Overall 2219 6115 1827 1325 3130 14616

Source: Higher Education Commission (2003–04)

6. EXPANSION

On inception there were only two institutions of higher learning in Pakistan,

both in the public sector. At this time there are 116 Universities and Degree
Awarding Institutions, 60 in the public sector and 56 in the private (Table 4.2 &
Figure 4.1).
The slight dip in the public sector institutions between 1968 and 1978 is because
of the separation of the eastern wing of Pakistan (East Pakistan) in 1971, which
resulted in the ‘loss’ of universities also. In the post-1971 scenario the following
deserve attention. One, the big spike in growth in HE institutions is relatively recent,
in both the public and private institutions, but much more so for the privates. Taking
1997 as the baseline, the expansion in the public sector institutions has been over
110% and in the privates it is slightly under 400%. If we go back ten years and
take 1987 as the baseline then the expansion is about 210% for the public sector
and 2800% for the private. Two, looking regionally or provincially, it emerges that

Table 4.2. Chartered universities and degree awarding institutions in the public
and private sectors: Temporal and provincial breakdown

YEARS 1947– 1958– 1968– 1978– 1988– 1998– TOTAL

1957 1967 1977 1987 1997 Present

PROVINCE Pub-Pvt Pub-Pvt Pub-Pvt Pub-Pvt Pub-Pvt Pub-Pvt PUB-PVT

Balochistan Nil Nil Nil Nil 1 Nil Nil Nil 1 Nil 31 51

NWFP 1 Nil 1 Nil 1 Nil 2 Nil Nil 1 68 11 9
Punjab 1 Nil 2 Nil 2 Nil 11 3 Nil 13 14 22 15
Sindh 2 Nil 1 Nil 3 Nil 11 17 3 18 11 26
Federal Nil Nil 1 Nil 1 Nil 1 Nil Nil Nil 73 10 3
Other Nil Nil Nil Nil Nil Nil 1 Nil Nil 1 Nil 1 12
TOTAL 4 Nil 5 Nil 8 Nil 62 59 32 45 60 56

Source: HEC Recognized Institutions

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Z. Gilani

Figure 4.1. Expansion in higher education institutions

the greatest number of privates (26) has been established in the Sindh Province,
mostly in Karachi, which is commercially the most developed city of the country. In
Sindh the private institutions outnumber the public ones (26 and 11). Punjab has the
second highest privates (15), most of which are again concentrated in Lahore, the
capital of the Province and its most developed city. However, the number of public
institutions in the Punjab outnumbers the privates (22 and 15 respectively). This has
occurred because the Punjab government has been declaring large public Colleges
as universities. In the NWFP the number of public sector institutions is marginally
more than those in the private sector (11 and 9). In Balochistan and the Federal
area of Islamabad, the public sector institutions clearly outnumber the privates: 5
and 1 in case of the former and 10 and 3 in the latter. Three, notwithstanding the
overall increase in demand, there are differences in the trajectories of expansion in
the public and private sectors, which are discussed below.
We will examine the expansion in both the public and private sectors as that
presents a better and more holistic picture of the public-private mix in higher
education.

Expansion in the Public Sector:  Much of the expansion in the public sector is
in many ways a pseudo expansion. The Punjab government used a short cut for
establishing public sector HE institutions by giving charters to already existing large
and usually well-reputed Colleges. Thus Government College Lahore, a premier
institution became Government College Lahore University, Lahore College for
Women became Lahore College for Women University and so on. The NWFP
government used a slightly different route by establishing universities in unused

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structures built for some other purposes: Ironically in one case a (former) mental
asylum. In the Federal area also the expansion has been quite rapid but largely
through giving university or degree awarding status to institutions established by
existing powerful and well-endowed but non-academic organizations. For example,
universities set by the Navy, the Air Force, and the Atomic Energy Commission
of Pakistan. The expansion of public sector institutions in Sindh and Balochistan
Provinces has been more calibrated.
There are a number of implications of these approaches. To begin with there are
almost no criteria on the viability, resourcing, or sustainability of institutions being
set up by governments or government-owned organizations. Second, the increased
number of institutions has not resulted in increasing access. More importantly, there
has been very little corresponding addition of infrastructure or human and financial
resources. As a subset of the above the governments keep upgrading existing
faculties and professional colleges (in universities) to full-fledged autonomous
universities. This trend started in the early eighties when a number of Engineering
and Agriculture Colleges, which were faculties in universities, were given charters
to function as independent universities in their own right. For example, the faculties
of Engineering and Agriculture of the University of Peshawar respectively became
the NWFP University of Engineering and Technology and the NWFP University
of Agriculture in 1981. However, their infrastructure and teaching staff remained
pretty much the same. That trend was dormant till the new millennium when a
number of medical faculties or colleges were upgraded and started functioning
as medical universities. The trend of establishing narrow specialty universities
continues, the latest illustration of which is the establishment of the University of
Education in Lahore. The expansion of the public sector in Pakistan also illustrates
that implementation of decisions and actions have a deep nexus with policy
(Trowler, 2002).

Privatization, Emergence, and Expansion of the Private Sector:  The government

allowed the private sector into higher education in 1983 when the Agha Khan
University (AKU), Karachi, was granted a charter. However, the AKU established
only a medical faculty. In 1985, the Lahore University of Management Sciences
(LUMS) was established in Lahore, the capital of the Punjab Province. As the
name indicates, LUMS provided training in various areas of Management. Both
these institutions were well-planned, properly staffed, and had adequate financial
resources to set up better quality programs in their respective areas than what
was correspondingly on offer in institutions in the public sector. They also played
somewhat of a pioneering role in the growth and development of private sector HE
institutions in the country.
A seemingly minor policy shift in public sector universities in the late nineties
proved to be the harbinger of the future. The government instituted a policy that
the public sector universities could admit up to 15% additional students at higher
fees: How much higher was not made very clear.4 The logic was that this will

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Z. Gilani

increase access, as well as tuition earnings, and thereby reduce the burden on the
national exchequer. It was also a backdoor approach to raising tuition fees, as higher
education in the public sector is heavily subsidized. As a result the more sought after
disciplines like Management and Computer Sciences started admitting students who
would not qualify on academic merit but who could afford to pay the higher fee.
It didn’t take too long for universities to capitalize on the increasing demand
(in some disciplines), so evening classes were started in those, with fees that were
much higher than that paid by students in the regular morning classes (‘evening’ is
a euphemism for early afternoon, when regular classes end around 2 pm). A large
grey area emerged around the evening classes in public sector universities. That
is, departments determined the tuition fees that the evening students were charged;
who would teach in the evenings; the remuneration of evening teachers and staff
etc. In theory, the larger percentage of earnings from the tuitions paid by evening
students were to go to the university and the smaller would stay with the concerned
department for its development (At the University of Peshawar the rule was 70:30):
This rule was notable for its breach. In a word a situation emerged that was largely
un-regulated financially and weakly monitored academically. The evening students
were second class because of their academic weakness that compelled them to pay a
much higher fee for the same education.
On the positive side, the departments, and to a lesser degree the universities that
offered evening classes became financially more viable. The evening teachers, a
very large majority of whom were full-time regular teachers of the university, were
much more regular in delivering lectures, because their remuneration was per class
taught rather than a salary. And they now had an additional source of income to
supplement their pitifully low salaries.
Recognizing the financial opportunities in the provision of higher education,
individuals with the entrepreneurial spirit took either of two paths. On the one hand
private affiliated institutions (see below) were set up usually by members of the
university communities, as they had the insider knowledge, and more importantly,
connections, of how to get the necessary approvals of affiliation with a university,
and the experience of how such an institution could be run. However, they usually
had some other face/s on the front and remained in the background themselves.
On the other hand, seeing the success of the Agha Khan University and LUMS,
the evening programs in public sector universities, and the affiliated institutions,
universities and degree awarding institutions started being set up by private
entrepreneurs.
The last mentioned trend was greatly facilitated by the somewhat simple-minded
reform agenda of the military regime that came into power in October 1999. Without
much consideration for availability of resources, particularly human resources, both
in the professoriate and management and administration, they got into the numbers
game and liberally issued numerous charters to private as well as public sector
institutions: As mentioned above this was particularly true for the two Provinces of
the Punjab and NWFP.

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In 2002 the Task Force proposed criteria for the establishment of a university or
degree granting institution in the private sector. That was approved by the Cabinet
in 2002 and is currently in operation. The criteria and the process of setting up such
institutions are fairly clearly laid out. However, there are a number of problems
of implementation. A large number of private institutions were granted charters
before the new criteria came into force, and a number of those do not fulfil all the
new requirements. That has raised a thorny legal issue because the charters were
granted by the Provincial governments but the monitoring body is the HEC, and
even if it (the HEC) considers that an institution is not meeting the set criteria it
has no legal powers to withdraw the charter, which only the Provincial government
can. Generally there are a lot of wrinkles in the regulation mechanisms of degree-
granting institutions or universities in the private sector, which anyhow are weak
and insufficient.

Institutions Affiliated with Universities:  Besides institutions that have their own
charters, there are 1389 known affiliated institutions that are providing higher
education in Pakistan. Of these 1158 are in the public sector and 231 in the private.
However, the former number (1158) includes 593 institutions about which it is
unclear whether they are public or private: This is a constraint of the available date.
Till the mid-nineties, almost all of the affiliated institutions were public, usually
Government Colleges.
Institutions get affiliation with a university, which then enables them to enroll
a pre-determined number of students: The number (of students) is determined by
the affiliating university for the privates but by the line department for the publics.
The affiliated institution has to follow the curricula and courses of the affiliating
university, which also conducts the examinations. Academically the only monitoring
mechanism that the affiliating university have is the examinations; which in turn are
archaic and mainly test the students’ memory rather than their level of learning.
In the public sector, the concerned affiliating university has no inputs into
where such Colleges should be established, the number of students they admit,
what subject areas they offer, what academic facilities are available, and most
importantly in the selection of teachers and administrators: These are bureaucratic-
cum-political decisions. The administrative and financial control of affiliated public
sector institutions is with the relevant Education Ministry and its line department.
By definition these public sector affiliated institutions are highly centralized with all
decisions being made by the bureaucracy in the provincial capitals. There is an obvious
disjuncture between academics, finances, and administration, which generates two
antagonistic hierarchies: On the one hand there are tensions between the College
teachers and administration and the affiliating University staff, which is also higher
in the pecking order as they determine the courses and conduct examinations. On
the other the centralized higher education structure puts the college administration
and teaching staff at a great disadvantage with regard to the education ministry and
the line department bureaucrats. Understandably, this double disadvantage of the

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Z. Gilani

College teachers erodes their motivation and most of them aspire to get posted to
the education department or the University: The openings and space for such moves,
however, are quite minimal.
There is a further structural complication in the public sector (affiliated) Colleges
with regard to their student body and the level of education provided. In the
prevailing stream of education, students go to secondary schools for ten years of
education and receive a matriculation or secondary school certificate on successful
completion. Thereafter they join the College and study there for two years obtain
an intermediate or higher secondary certificate. Thus the same College is providing
two years of high school education, for which they have to adhere to the curricula
prescribed by the respective Board (of Secondary and Higher Secondary Education),
which is also the examining authority for that level. On successful completion of
12 years of (school) education, the student joins the undergraduate program of the
affiliating university. However, in the vast majority of cases s/he remains on the
same premises. The infrastructure and resources (academic, human, and financial) are
the same for the two sets of students, namely, one set learning high school materials
and the other set ostensibly doing university level courses. The biggest problem is
that the same teachers take classes for both sets and the academic resources like
libraries etc do not even meet the requirements of the lower level.
In summary the Government College in Pakistan lacks coherence: Academically,
it follows the respective Board for students in years 11 and 12, and the affiliating
university for years 13 and 14. Financially and administratively it is under the
Provincial Education Ministry and its relevant line department. The primary
accountability of administration and teaching staff is to the bureaucracy and the
affiliating university has no mechanism by which to hold the College responsible for
the quality of instruction and learning. Consequently the quality of higher education
being provided at such Colleges is extremely poor.
Private institutions that seek affiliation with a university have to fulfil the
requirements of the rules (of affiliation) of the concerned university. Taking the Rules
of Affiliation of the University of Peshawar as they stood in 2001 as an illustration,
these seem to have been developed without much thought, the reason for which has
been alluded to earlier.5 To reiterate, those rules were not ever used because all of
the affiliated institutions were in the public sector and the Provincial Governments
simply informed the affiliating university about the establishment of an institution
of higher education (usually a Government College) and the university simply
arranged the examining of the students attending such institutions. It was only when
private institutions started seeking affiliation that the gaps and contradictions in the
Affiliation Rules became apparent, if they did.
Generally the public sector universities that can grant affiliation have been quite
miserly, primarily because they don’t want privates to enter their turf, especially
since they (the private providers) usually seek affiliation in subject areas that have a
high demand and are likely to be lucrative. However, if someone from the university
wants to venture and has the right connections, then the chances of obtaining

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approval of the affiliation are brighter. Like many other matters in universities in
Pakistan, the informal network/connection system produces pragmatic results and
rules are there largely as window-dressing.
The private affiliated institutions are financially and administratively independent.
For example, they determine the tuition and other fees that the students have to pay.
On the ground the market is the major determinant and some areas like Medicine
or Management or Information Technology fetch much higher fees than others like
Education. Most private affiliated institutions are quite narrow in their focus as
they cater to those areas of study that are in demand and thus ensure good financial
returns. In short, the driving motive for their establishment is pecuniary. The
regulation mechanisms of degree-granting institutions or universities in the private
sector continue to be weak and insufficient. In fact this remains largely a grey area as
it is not very clear who will monitor, neither are the monitoring modalities in place.
Those institutions that are affiliated are also un-monitored because of the weak
human and infrastructural resources of the parent or affiliating institutions. This has
resulted in myriad problems like weak teaching faculty and administration, meagre
library resources, no research, and so on. The tendency to create hurdles at the time
of giving affiliation and then forgetting about monitoring is amply revealed by the
fact that usually universities have no rules or procedures for withdrawing affiliation.6

7. ENROLMENT AND ACCESS

The higher education systems are in the process of flux and transition in much of
the world. In many places the shift is towards mass access, while in the developed
world the shift maybe to universal access (Trow, 2006). In Pakistan the access is
still primarily elite and the increase in the number of institutions, including the
entry of private providers has not broadened access in any meaningful way. Higher
education can act as a powerful mechanism for upward mobility in many developing
countries, allowing the talented to thrive irrespective of their background. It
provides opportunities for the talented to become leading political leaders, civil
servants, doctors, lawyers and engineers, teacher, managers and entrepreneurs in a
meritocratic society (World Bank, 2002). However, this is only a theoretical dictum
in Pakistan where expansion has occurred in an unplanned manner, has not increased
participation, increased commercialization, and negatively impacted quality.
Though the number of institutions of higher education has grown rapidly over
the past two decades, Pakistan has one of the lowest enrolment ratios in the world.
The policy response to date has emphasized development of new universities.
Further, the absolute numbers of institutions in the public and private sectors could
be misleading because the public sector institutions are in general much larger and
more affordable, thus having much larger enrolments than the private sector. 87.5%
enrolment is in public sector institutions, while only 12.5% of the total student
enrolment is in private universities. Of the enrolment in the public sector 44% are
being taught through distance learning (see Table 4.3).

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Table 4.3. Number of students in higher education institutions by area & sector

Balochistan
Learning
Distance

TOTAL
Federal

Punjab

NWFP
Sector

Sindh
AJK
Public 159257 31843 2005 86032 46959 5217 30815 362128 (87.5%)
Private – 4720 379 16749 32831 564 5865 51668 (12.5%)
Total 159257 36563 2384 102781 79790 5781 36680 413796

Source: Higher Education Commission

Location Impediments:  More than half of Pakistan’s population resides in rural

areas, where access to higher education is physically and financially challenging.
Metropolitan cities have the basic infrastructure of meeting the demand of the urban
population. Most rural areas simply do not have the necessary infrastructure or
the local base of human or physical resources to support educational institutions.
Therefore, there is not a single university in the rural areas of the country. For the
rural population the financial burden of migrating to cities for higher education is
also a barrier, and the socio-cultural impediments for women to do this are virtually
un-surmountable. To complicate matters further, universities in the country are
based on colonially introduced geographical ‘jurisdictions’ over certain areas, and
students from other areas wishing to apply to a particular institution have to compete
on arbitrarily decided quotas. This situation limits the access to higher education, for
women in particular.

Economic Impediments:  A key deterrent in access to higher education is its

cost. The increasing cost of education (which includes tuition as well as external
costs), rising inflation, and decreasing real household income widen the distance
between the student and attainment of higher education. On the one hand, monthly
household incomes lies between PKR 9384 for urban and 5680 for rural families.7
On the other hand, the higher education experience in a typical public university
costs at least PKR 4,250 per month. Currently, public universities have two sets
of tuition charges for students: those selected on the basis of their academic
achievements and those who pay full cost tuition, referred to as ‘self-financed’
students. The tuition fees for the latter group are 5 to 10 times that of the former.
This system has been the universities’ attempt to generate funds because over
the years it has become apparent that governments in Pakistan have been neither
willing nor able to do so. This system places the burden of literally ‘running’
the university on students (who now averagely pay for about half of the public
sector university costs), which creates pathologies of dependence and could dilute
university independence by placing inappropriate budgetary pressures at the

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 Public-Private Mix in Higher Education in Pakistan

Table 4.4. Province and city-wise distribution of Higher Education Institutions (HEIs)

PUNJAB SINDH NWFP BALOCHISTAN FEDERAL AJK

City City City City City City
HEIs HEIs HEIs HEIs HEIs HEIs

Lahore Karachi Peshawar Quetta Islamabad M’abad

25 26 09 04 13 03
R’pindi Hyderabad Abbotabad Khuzdar
03 02 02 01
Faisalabad Jamshoro Nowshera Other
04 03 01 02
Others N’shah Other
05 01 06
Khairpur
01
Other
02
TOTAL: 37 35 18 07 13 03

Source: Higher Education Commission

admissions stage. Additionally, by subsidizing all the students admitted on merit

(which is still the vast majority of the enrolled students), including those who
can easily afford the full cost of education, it is unfair to those deserving students
who cannot afford a university education at all (a large portion of which is not
tuition but living costs, books, etc.).8 Tuition fees are generally lower in the public
sector universities than in private but the external and opportunity costs of higher
education is unbearable for most. The majority of the population simply cannot
afford the cost of higher education.
In the private sector the tuition fees are variable depending on the nature of the
program, with the most sought after, like medicine or management, being the most
expensive. However, since private institutions have more or less of a free hand in
determining fees, and almost all of them are for-profit (though that is never reflected
in their charter) it is quite difficult to obtain accurate figures. Anecdotal evidence
indicates that the fees of private medical institutions and the best management
training institutions is between three to six hundred thousand Pak rupees per
academic year (About 5,000 to 10,000 US dollars). Further, since most of these are
in metropolitan areas, living costs are also quite high.
While about 20% the richest households in Pakistan can afford to send their
children to colleges and universities, the bulk of the population either simply cannot
afford to do so or cannot afford to make an investment that has limited chances of
returns in the form of employment.9

77
Z. Gilani

To properly appreciate the level of exclusion from good higher education, the
costs and quality of secondary education in Pakistan has to be considered. In
the 1980s the then military government took the policy decision to allow the
private sector to start providing school education in the country. As expected
a very large number of private schools emerged with varying levels of quality.
The better quality schools charged higher fees and very quickly school education
was ghettoized. That is, those who were economically better off; which included
the planners, decision-makers and senior government officials; started sending
their children to the high-fees, better private schools. The not so well-off children
went to government schools, which suffered from inattention as the standards
there had no effect on the children of those in decision-making positions. Thus
the opening up of school education to the private sector resulted in perpetuating
the existing opportunity gap between the better and nor so well-off sections of
society: Demographically the latter includes over two-thirds of the population of
Pakistan.
Consequently, those who have been better prepared for higher education by
attending expensive private schools are at a distinct advantage as they score well
in their secondary examinations and on entry tests for university admissions, which
have become a norm for the sought after programs of study in better institutions.
Therefore children of the higher socioeconomic backgrounds get admission in
institutions in the public sector that cost lesser, and are the main beneficiaries of
the highly subsidized education in public sector institutions. Those who fail to get
admission there go to the evening classes in the same universities or join a private
institution.

8. QUALITY AND EQUITY

The trajectory of expansion and change in higher education in Pakistan has created
a link of the quality of education with cost, and sharpened the gaps between the
majority of the not so well-to-do population and the few who can afford expensive
higher education. Two major trends are discernable that are further compounding the
existing socio-economic inequities. One, as happened earlier in school education,
with increasing commercialization and the emergence of private institutions, the
quality of higher education in public sector institutions is declining. The primary
factors contributing to this are the manner in which institutions are being governed
and the quality of teachers. On both counts the better private sector institutions have
a better track record. In terms of governance and management, they have introduced
more modern systems that are more efficient, and have greater accountability
and transparency. And their methods of selection and opportunities for career
advancement of institutional leaders and teachers are more professional. As a
result the better professors and administrators from public sector institutions have
started joining private sector institutions because the working environment and pay

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 Public-Private Mix in Higher Education in Pakistan

packages there are far better than what they were receiving, or could receive, in the
public sector.
Two, this trend has been accompanied by an increasing commodification of
higher education. According to Naidoo and Jameison “Commodification in higher
education can therefore be defined as the transformation of educational processes
into a form that has ‘exchange’ value, rather than an intrinsic ‘use’ value” (Naidoo &
Jameison, 2005: 39–40). As higher education becomes more and more commodified,
it produces institutional competition (for students) at the cost of standards of
academic quality. Most importantly, the emergence of private institutions of higher
education has been concomitant with the growing perception that higher education
is a commodity like any other, and the better quality costs higher, and is therefore
unattainable for the majority of the population.

9. FUNDING

Historically higher education in Pakistan has been dealt with as one component of
the overall stream of education: And in keeping with global policy for developing
countries, an insignificant component to boot. Within the general neglect of
education in the priorities of national needs, the resourcing of higher education has
been extremely meagre. The total allocations to education have been rather low
even on regional standards, and how that pie has been divided between primary,
secondary, and higher education has fluctuated over time, with higher education the
‘doubly deprived’, especially over the past two decades (Table 4.5).

Table 4.5. Development expenditure on education in five year plans (Rupees in billions)

Education outlay
Five Year Plan

Development

Development

Development
as % of total

as % of total

as % of total
Outlay for

Outlay for
Education

Education

Education

Education

Education
Higher

Higher

Higher
Outlay

Outlay
outlay
Total

1955–60 9.3 0.581 6.2% 0.175 1.88% 30%

1960–65 19.0 1.423 7.5% 0.190 1.0% 13%
1965–70 52.0 2.674 5.1% 0.395 0.76% 15%
1972–77 75.0 3.665 4.9% 0.705 0.94% 19%
1977–83 215.0 10.255 4.8% 1.457 0.68% 14%
1983–88 490.0 19.830 4.0% 3.400 0.70% 17%
1988–93 642.4 22.680 3.5% 2.415 0.37% 11%
1993–98 1700.0 69.032 4.0% 6.607 0.39% 10%

Source: Five Year Plans

79
Z. Gilani

The share of public expenditure on higher education has been low over the
years compared with many other countries. Leading reasons for the decline of
higher education in the country include misplaced priorities, inefficient allocations,
ineffective programs and projects, and sheer corruption. Progress and reforms in higher
education need adequate funding and appropriate utilization, which the state has been
largely unable to ensure. While the government had been unsuccessful in providing
universities with adequate funds, the universities too have largely failed to generate
adequate income for themselves or to efficiently use their funds, albeit meagre. There
are hardly any meaningful attempts by the universities to generate income beyond high-
price education for financially capable students (with low merit), through which public
universities manage to raise about half of their cumulative budget. This budget meets
largely recurring costs, and cannot make significant contributions to raising quality.
The current system of government funding of universities is overly simplistic
in some ways and unnecessary complex in others. On the one hand the system is
based on the principle of historical trends, and deviations from those are quite rare.
The government has provided additional resources to enable universities to address
specific issues or introduce new facilities. These additional resources do not appear
to be based on an overall program of university development; rather it has generally
been on ad-hoc proposals with inadequate and outdated monitoring systems.10
Recent introduction of project funding by the HEC is more closely tracked, but this
does not constitute the bulk of the development grants to universities.
On the other hand, the process is unnecessarily complex. The funds are made
available via instalments which rarely reach the universities on time. The total
amount of the instalments is not received as a whole by the university. In other
words, any four instalments are never equal as the first two are less than 20% of
the total amount.11 In addition, the channeling body (earlier UGC and now HEC)
takes a significant transaction cost out of the overall chunk allocated by the federal
government. Government policies also create uncertainty because of changes in
national pay scales or other allowances. “The simplistic as well as complex nature of
these processes combines to create a situation of unpredictability for universities”.12
Due to these unpredictable processes and absence of logic in budget allocations,
the total volume of grants to be received per year remains uncertain. This makes it
difficult for university leaders to plan for the future, and they spend considerable
time going through bureaucratic processes to get to what has been allotted to them.
Such practices not only inhibit the autonomy of the educational institution but
also undermine decentralization and delegation of powers within the university.
The system then leads the university to non-transparent financial practices by the
administration in order to cope with the recurrent liquidity crises.

10. CONCLUSION

It is prudent to examine the higher education system as a whole, including both the
public and private providers. Historically, as in most of the world, the public sector

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 Public-Private Mix in Higher Education in Pakistan

preceded the private, and the emergence of the latter has been in the shadow of the
former. The public sector system had, and continues to have, problems both at the
macro and the micro levels. At the macro level there is lack of clarity about purpose;
meagre dovetailing with the changing labor and technological demands; absence of
long term planning; ad-hoc and piecemeal policies; low funding; and weak human
resources.
At the micro level the governance and management of institutions of higher
learning do not foster efficiency or quality; academic leadership as well as a
professional executive are weak; there is low motivation and commitment within the
Professoriate; the programs and curricula are mostly irrelevant to societal needs; and
both teaching and research leave a lot to be desired. Resultantly, while the absolute
number of graduates is increasing, most graduates do not have the required knowledge
or skills to meet the requirements of an increasingly technological labor market, or
to provide adequate leadership in other social sectors. It is a common perception in
the country that universities are producing degree holders, not educated people.
There are two areas in which the emergence of higher education institutions in the
private sector has had a positive impact: One, introducing more modern and efficient
systems of governance, management, and administration. And two, introducing
better quality and newer programs of study. This has also developed pressure on
public sector universities to adopt some of those methods and programs. Further,
the public institutions are taking on ‘private’ characteristics, especially as funds-
generating entities.
The emergence of private institutions has however exacerbated the already
grave socio-economic and opportunity inequities. As happened earlier in school
education, apartheid is emerging in higher education, where the well-off are going
to better quality and higher fees private institutions and the majority of students are
compelled to go to public ones because of affordability. The quality of learning is
declining in the latter because of the in-country brain drain of the Professoriate as
well as management and administration to the privates because of better packages
and working conditions.
Most important is the wider socio-political and economic context, within which
higher education is embedded. Higher education and its institutions can improve or
deteriorate as a function of the wider context. Overall there has been deterioration in
the building-up or strengthening of institutions in the country. The wider environment
is primarily geared to serve the elite, centralize power, and foster personal gains,
rather than build or strengthen institutions: The higher education system suffers
correspondingly.

NOTES
1
Pakistan is a federation with four Provinces and Provincial governments in Pakistan in the Punjab,
Sindh, North West Frontier Province (NWFP), and Baluchistan. Besides there is the Federal
Government and the government of Azad Jammu and Kashmir (part of a disputed territory).

81
Z. Gilani

2
HEC Website, http://www.hec.gov.pk/htmls/second_n.asp
3
Haque, I. (2005, July 28). DAWN. Retrieved from http://www.dawn.com/2005/07/28/index.htm
4
The following depiction is based on the experience at the University of Peshawar. However, since this
was a national policy, similar developments took place in all public sector universities in the country.
5
As the Vice Chancellor of the University of Peshawar from Dec 2000 to Jan 2004, the author reviewed
all rules and instituted across the board reforms, including a complete re-drafting and implementation
of the Affiliation Rules.
6
This shortcoming was rectified in the University of Peshawar in 2003.
7
Federal Bureau of Statistics, Government of Pakistan, 2003–04.
8
Higher Education Reform: Implementation Plan, Steering Committee on Higher Education,
Government of Pakistan, November 2002.
9
Higher Education Reform: Implementation Plan, Steering Committee on Higher Education,
Government of Pakistan, November 2002.
10
Op cit, Higher Education Reform: Implementation Plan.
11
Ibid.
12
Ibid.

82
 PEDRO TEIXEIRA

5. REGULATORY CHANGES AND

THE PUBLIC-PRIVATE MIX IN
PORTUGUESE HIGHER EDUCATION

1. INTRODUCTION1

Until recent decades, many Western European higher education systems remained
subject to strong government regulation and provision (Neave & van Vught, 1993).
However, due to a variety of reasons, recently there were important changes in the
traditional role of the government as the sole provider of funding and regulation for
higher education institutions, with some market-like mechanisms being employed
by governments in order to increase the efficiency and responsiveness of the
institutions to societal demands (Teixeira et al., 2004). Thus, in recent decades, this
has changed and Europe started to participate in the global expansion of private
higher education (Altbach, 1999). This was particularly felt in Southern (Teixeira
et al., 2014a) and Eastern Europe, where this meant the emergence of a completely
new reality (Slantcheva & Levy, 2007).
The growth of the private sector was also helped by other forms of privatisation
of the system that increased the “privateness” of the dominant public system of
higher education (Morphew & Eckel, 2009). The relative decrease in the dominance
of public HE also coincided with a period of increasing constraints on public
expenditure. The so-called crisis of the welfare state has challenged the sustainability
of the traditional financial reliance of HEIs on public funding (see Barr, 2004;
Herbst, 2006). The changes were also influenced by the changing political mood that
affected western countries since the early eighties, as well as the debate about the
type and degree of government intervention, with the ideological pendulum swaying
towards increasing liberalisation and restrained government regulation (Pollitt &
Bouckhaert, 2011; Teixeira & Dill, 2011). The discourse about public services
became populated by managerial jargon and customer orientation. Hence, in many
countries, the promotion of private institutions has been regarded in as an instrument
for fostering the assimilation of more efficient practices among public HEIs through
better management of resources. Private HEIs were supposed to demonstrate an
increased capacity for exploring new market opportunities and for occupying market
niches by using their higher administrative flexibility and financial motivation.
Additionally, they were expected to promote a better balanced supply of HE from a
geographical and disciplinary perspective (Teixeira et al., 2014b). A similar rationale
was present regarding labour market demands, as the expected greater responsiveness

83
P. Teixeira

of private-type HEIs was regarded as a powerful force driving institutions to supply

qualifications that were more suitable to labour market needs. The changes aiming
at strengthening market forces and a greater role of private initiative in HE were
believed to favour the emergence of innovative behaviour (Geiger, 1986).
This chapter analyses how the private sector came to play a major role in
Portuguese higher education. We will start with an overview of the main recent
trends in the system, namely how the Portuguese system moved rapidly from
an elite to a mass system. We will then analyse the major factors that stimulated
the rapid development of the private sector, which had its heyday between the
eighties and the nineties, and why since then, the private sector has experienced
significant difficulties. The analysis will focus in the pattern of development of the
private sector and the way it responded both to market stimuli and to systemic and
regulatory changes that moulded its development. This chapter ends by assessing
the contribution that private higher education has had in Portugal and the role it can
play in a mass system.

2. PORTUGUESE HIGHER EDUCATION – FROM EXPANSION TO SKEPTICISM?

Portugal has traditionally presented very low educational qualifications due to

a variety of factors. On the one hand, there are important economic reasons. The
country has had an economic performance that was slower compared to most of its
European counterparts during long periods of the last two centuries (see Lains, 2003).
This slower rate of economic progress has restricted the public and private wealth
that could be allocated to the qualification of its population. Moreover, the country’s
slow technological progress has hindered growth in the demand for qualified labour
and therefore did not provide a strong stimulus to individual and social investments
in education. On the other hand, non-economic aspects also played a role in this
educational backwardness. Those factors, such as nationalism, political and social
cohesion, and religion, which played an important role in many European countries’
greater effort in promoting literacy, were either absent or minor in this case (Reis,
1993). For centuries, Portugal has had a significant homogeneity in ethnic, linguistic
and religious terms. Portugal became a national entity in the twelfth century and its
borders have been rather stable for many centuries. The dominance of the Roman
Catholic Church did not stimulate believers’ quest for literacy, as in many parts
of Europe under strong Protestantism influence. Thus, both economic and non-
economic factors contributed to persistent educational backwardness.
Despite some efforts, the levels of qualification grew slowly until the mid-twentieth
century. It did not help that between 1926 and 1974, a nationalist authoritarian regime
dominated the country, leaving an inheritance that placed the country at the tail end
of Western European countries regarding major social, economic and educational
indicators. By the early seventies, the education level of the Portuguese population
was extremely low, with high illiteracy rates and an elitist higher education system.
In the early 1970s, the authoritarian regime launched a reform that, inspired by a

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 Regulatory Changes and the Public-Private Mix

Table 5.1. Level of literacy and degree completion of the Portuguese

population (% of population 15–64 yrs.)

Level 1960 1970 1981 1991 2008

Illiterate 61.4 38.1 27.5 16.1 4.2

Basic 22.5 49.6 56.6 56.5 70.0
Secondary Na Na 13.2 19.6 14.7
Tertiary 0.9 1.6 2.8 6.1 11.0

Source: Barreto 1996; INE various years

more economically-oriented approach towards education, aimed at expanding and

diversifying the higher education system.
The 1974 Revolution caused a dramatic turn from a rightwing conservative
authoritarian regime to a radical leftwing socialist regime and led to a fast
succession of unstable governments. Higher education institutions were quickly
submerged in political turmoil. Universities were asked to help in the search for
answers to national problems while making their technical and scientific capacity
available to other public services. On the one hand, higher education was supposed to
expand and provide training or retraining courses, and to increase its offering
of specialised services to the community. On the other hand, it was supposed to
diversify either by creating new schools and new courses or by differentiation
of some already established courses. Another important political goal was to
regionalise some universities in order to serve the economic and social needs of the
population.2
By the late seventies, the major political actors searched to introduce stability and
to consolidate an institutional framework similar to most of Western Europe in view
of a future integration into the EU (which eventually occurred in 1986). The major
policies during this normalisation period aimed at the growth of the higher system
and its diversification by implementing a binary system and slowly allowing for
the emergence of the private system). One of the pressing problems was the very
strong demand for certain degrees, namely medicine, which led to the introduction
of a numerus clausus system in 1976, which still remains in place until presently.
This policy protected public institutions from excessive increases in enrolments but
generated very strong social tensions because many candidates had been left outside
the system without any alternative. This would also contribute to the development
of a large private system.
The egalitarianism that characterised the post-revolution period gave an
additional stimulus to the development of non-university forms of higher education.
Accordingly, all mid-level forms of education were transformed into the Polytechnic
Higher Education in the late seventies. The political aim was both to diversify higher
education and to fulfil the urgent economic need of middle level technicians. Both

85
P. Teixeira

the government and the World Bank agreed that higher education should have a
more active role in technical training. These orientations were later reflected on the
1986 Basic Law on Education, which attempted to clarify the binary divide and
specify the contribution of the polytechnic and university sub-sectors.
In the late eighties, the main changes were consolidation of the private/public
duality within the system and the autonomy awarded to higher education public
institutions. The University Autonomy Act of 1988 conferred public universities
some freedom to define their internal organisation, together with scientific,
pedagogical, administrative, and financial autonomy. Later, public polytechnics
were also given autonomy, but to a lesser extent than were universities. From 1990
to 1994, institutional autonomy was reinforced while two coordinating bodies, the
Council of Rectors of the Portuguese Universities (CRUP) and its homologous
organisation for polytechnics (CCISP), emerged as important actors in the definition
of higher education policies.
In recent years, reorganisation of the system became a critical issue in the
agenda, especially given the decreasing number of candidates for higher education
and their concentration in some parts of the country. The rapid and largely
unregulated expansion of higher education fostered a network of institutions and
study programmes requiring better coordination and presenting some problems of
overcapacity in certain regions and fields. Initially, this mainly mainly the private
sector, but it eventually spread to the overall system, particularly affecting the less
prestigious institutions, those located in more peripheral parts of the country, and
those fields in which the expansion had been more unbalanced compared to actual
demand.
This evolution since the early twenty-first century created a very different context
in which institutional competition was exacerbated and the emphasis at the system
level moved from quantitative expansion to qualitative improvement. Quality and
relevance of the overall higher education system (and its institutions) became the
central issue, and remained as such until presently. Moreover, those dimensions were
increasingly linked to a concern regarding the effectiveness of the higher education
system in contributing to economic and social development, which has placed
public and private institutions under increasing scrutiny. Policy makers and various
social actors have become more interested in higher education issues, but also more
inquisitive regarding the economic and social relevance of higher education, notably
through the value of its degrees in the labour market.
This was reflected in two contrasting periods in the policy and regulatory
framework of Portuguese higher education. Whereas in the 1980s and 1990s, the
priority was given to rapid expansion and many political and social actors considered
this as the best way to channel the potential contribution of higher education to
the country’s economic and social modernisation, in recent years the attitude has
become more skeptical. Although higher education is still regarded as a major tool
for the country’s, as well as for individual’s, aspirations, the general perception is that
more emphasis should be placed in developing solid and effective higher education.

86
 Regulatory Changes and the Public-Private Mix

These different contexts are very important for understanding the development of

private higher education in Portugal and its place in the overall higher education
system.

3. THE DEVELOPMENT OF THE PORTUGUESE PRIVATE HIGHER

EDUCATION SECTOR

As in many European countries, in modern times, Portuguese higher education

became highly dominated by public provision. Until the early seventies, private
provision was very modest and was characterised by a few small and specialised
institutions, often affiliated with the Catholic church. The initial development
of private higher education in Portugal was favoured by the public institutions’
involvement in deep political and social turmoil in the aftermath of the 1974
revolution. Many professors were expelled from public institutions because they
were regarded as being too close to the former authoritarian regime and others left
frustrated with student unrest that was paralysing the activities of many institutions.
At the time, private institutions emerged as a quieter alternative where quality and
traditional (academic) values could be preserved.
The development of private institutions was initially rather slow. In 1971, the
Portuguese Catholic University was established as part of the agreement between
Portugal and the Vatican. Although this institution can be largely regarded as a
private institution, it has enjoyed some special conditions. However, the subsequent
development of the private sector eroded most of that special treatment and very
little remains of that early privileged status. In early 1979, the Minister of Education
authorised the creation of the first fully private university by granting the ‘Free
University Cooperative for Education’ (Universidade Livre) a temporary permit to
initiate operations and in the early eighties, the institution was allowed to offer study
programmes in the two main cities, Lisbon and Porto.3
Until the early eighties, the size of the private sector was very small, but the pace of
implementation accelerated after the mid-1980s. Enrolments in private institutions in
1982–83 were only about 11% of total enrolments. In 1986, the Ministry recognised
two new private universities (Lusíada and International) and several polytechnic-
type institutions, some of them resulting from upgrading already existing medium
level institutions, which until then were not allowed to confer higher education
degrees. The new institutions concentrated their offering of study programmes in
areas of low investment/low running costs, such as languages and administration,
management, journalism, training of secretaries and interpreters, and informatics.
In the mid-eighties, the idea of significantly increasing the role of the private
sector gained strong political support in Portugal. Some authors presented private
higher education as a powerful solution to some of the most important problems
of Portuguese higher education, such as the fulfilment of regional demand by
decreasing regional disparities of access and even decreasing social demand (Franco,
1994). The main motivations for the development of the private sector were both

87
P. Teixeira

pragmatic and ideological. On the one hand, private higher education was regarded
as an instrument for solving the dramatic problem of increasing demand for higher
education that could not be met by the public sector, especially during the years
of severe economic stringency following the revolution. On the other hand, some
political actors clearly regarded private higher education as an important ideological
instrument for strengthening the Portuguese democracy and as a tool for social and
economic development. Thus, from the mid-eighties to the mid-nineties, private
higher education would become the fastest-growing sub-sector among a system that
was itself expanding extremely fast.

3.1. Policy Trends and the Regulatory Environment

In many countries, state authorities have traditionally strongly regulated modern

higher education, though recent developments profoundly influenced the
relationship between the State and higher education institutions (HEIs). The
changes in public administration and finance stimulated the emergence of a different
context for public intervention. Pressed by increasing financial constraints and
by an increasing cost burden due to massive expansion of the higher education
sector, governments searched for ways of coping with this paradoxical situation,
redefining not only their financial role, but also their administrative and political
roles. The changes in the regulatory mechanisms of the system are also associated
with the increasing importance of the market dimension in higher education systems
and the strengthening of institutional autonomy (Teixeira et al., 2004a). Thus, the
claims for increasing responsiveness and adaptability of the HEIs were frequently
associated with the development of the so-called quasi-market structures for higher
education (Le Grand, 2006). Although the Portuguese higher education system
developed later than did most Western systems, these trends eventually made their
way into the system (Teixeira et al., 2004b; Teixeira & Amaral, 2010).
The relationship between the government and the private sector has always been
ambiguous in Portugal. Initially, the government was largely responsible for creating
very favourable conditions for its rapid development. By the mid-eighties, the Ministry
of Education, at that time led by a Minister who was very much in favour of the
development of the private sector in education, changed the access system by making
it much easier for students to apply to a higher education institution. This rapidly
created a large additional demand that could not be fulfilled by the public sector,
despite its growth. Thus, political agents artificially created an important market for
higher education that allowed private institutions to prosper and proliferate.
The political context also favoured the mushrooming of private institutions. The
governments at that time did very little to control the quality of the institutions
and programmes offered. Moreover, they made easier for the private sector to take
advantage of public sector academics in a moonlighting system. The development
of the private sector was so fast that during the 1991–1992 academic year, the
number of vacancies at private institutions exceeded those at public institutions,

88
 Regulatory Changes and the Public-Private Mix

despite the fact that the network of public institutions was much older and much
more consolidated in terms of equipment and staff.
However, in other aspects, the behaviour of the public authorities was inconsistent
with this pro-private sector stance. At the same time that the government allowed the
private sector to mushroom, it kept close bureaucratic control over private institutions,
which were granted less pedagogical autonomy than were public universities.
Moreover, large investments were being made in the public sector, allowing the number
of vacancies at public institutions to increase steadily over the years. Then, when
participation rates attained levels close to the European ones, the government decided
to change its policy from uncontrolled expansion to increased quality. The Ministry
of Education implemented legislation that increased the requirements for students to
complete secondary education and to apply to higher education, namely by allowing
higher education institutions to set minimum marks in the access examinations for
higher education. While the best institutions had no problems in setting minimum
marks, this was carefully avoided by less reputable institutions, which tried to fill as
many vacancies as possible by using lower entrance standards. This decision exposed
to public scrutiny those institutions that could not attract students.
This close relationship with policy makers was one of the factors that contributed to
making private higher education more vulnerable. Although the initial development
of private higher education was significantly fostered by some key policy actors,
trust in private education was not widespread and other Ministers of Education had a
more critical view of this sector, in accord with the European tradition. The fact that
successive Ministers had different ideological commitments to the development of
the private sector has played a negative role in its long-term implementation. At the
same time, different actors in the area of higher education had different degrees of
commitment to the various objectives of the reforms, and sometimes their objectives
of were even quite different from those of the government.

3.2. Higher Education and Education and Training Policies

Higher education cannot be analysed without taking into account that it is part of a
system and is therefore influenced by what happens in earlier levels of education. In
Portugal, the influence of basic and secondary education is apparent through several
ways. The demand of higher education is significantly limited by the capacity of
the basic and secondary parts of the educational system to retain and qualify the
younger cohorts of the population. The slow development of literacy in Portugal has
long hindered the development of a mass higher education system. Even nowadays,
lower levels of education still present significant problems with performance that are
strongly related to a recent and delayed massification.
Both the basic and secondary levels of education present deep problems of
drop-out and retention. In 1986, the basic law on education expanded compulsory
education from six to nine years and in the late 2000s, this was further expanded to
require 12 years of compulsory education (including all of secondary education).

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This provided a major contribution to an increase in the level of qualifications

of younger cohorts, but many youngsters still abandon the educational system
without even competing basic education, let alone secondary school. Many students
eventually finish basic education, but the levels of retention and drop-out grow in
the first year of secondary education. Hence, less than half of Portuguese students
complete secondary education, which is far below any other EU member state.
The main factors underlying this situation seem to be a mix of economic, cultural
and social factors. The late modernisation of the Portuguese economy, as compared
to most western European countries, has left some traces in the labour market.
Thus, there are still some possibilities of getting a job for poorly qualified workers.
Although these are clearly associated with poor prospects in terms of employment
stability and long-term income, many youngsters coming from the lower income
strata seem to be lured by the immediate opportunity to get full time employment,
as badly paid as it may be. The opportunity cost of attending full-time education and
the lack of effective support mechanisms continue to lead many youngsters out of
school without finishing secondary or even basic education.
The situation is made worse by the social and cultural context. The levels of
qualification of the Portuguese population have been persistently low, thus, most
parents of these youngsters have not attained a level of formal education beyond
basic education. Many of these parents either underestimate the economic value of
education or do not seem to be highly motivated to require their offspring to remain
at school. Education still seems to suffer from the fact that historically, it has been
regarded as a privilege for the elites and the middle classes.
This negative situation also seems to be due to the lack of direction in educational
policy. Many of these drop-outs could be possibly prevented if there were attractive
opportunities for vocational secondary education. Vocational secondary education
has existed for many years, but its role and the priority attached to it has fluctuated
over time. This has neither contributed to establishing it as a serious alternative for
many students, nor does it provide social and labour market acceptance. Current
policies regard vocational secondary education as a main priority in the expansion
of secondary education and a critical instrument for improving the efficiency
and effectiveness of the system. However, it is yet to be seen if this will produce
significant results or if it will be just another policy programme that will fade away
before results have been produced.
These persistent problems in basic and secondary education have had important
consequences for higher education. On the one hand, the problems significantly
restricted the pool of applicants because less than half of the age cohort completed
secondary education. Changes on this front were regarded by many, namely in
the private sector, as a crucial instrument for overcoming the crisis in the demand
for higher education, though the reality proved to be less promising than their
expectations. On the other hand, the low status of vocational education has also
hindered further development of the vocational sector of higher education. There
have been some signs of greater emphasis on vocational education in secondary

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education, but there is still the risk of erratic policies, which may hinder the stated
efforts to overcome enduring and complex problems, such as retention and dropout.

3.3. Economic Factors

The modern expansion of Portuguese higher education that started during the 1960s
was associated with important economic transformations occurring over recent
decades. Throughout the period, there was an acceleration of economic growth and
increasing pressure for liberalisation of the Portuguese economy, which was largely
used to mitigate forms of excessive capitalistic competition. It was also the product
of the emergence of a younger generation of politicians favouring industrialisation
and a modernising agenda to replace traditional conservatism. Those changes
unleashed an expansion of higher education that would raise the expectations of the
population, eventually challenging the elitist nature of the system.
The behaviour of students and families in recent decades seems to have been rational
from an economic point of view, given the potential return associated with a higher
education degree. Despite the massive expansion over recent decades, an analysis of
the rates of return on higher education degrees in Portugal indicates that not only have
these been persistently high, but they are also at the highest level of the 15 EU countries
(Pereira & Martins, 2000). The average rate of return for education has clearly increased,
especially since the mid-1980s, which was the period of the system’s substantial
expansion. Although we lack more detailed data by sub-sector, the differences may not
be very significant. Moreover, this pattern of high rates of return for higher education
degrees seems to be valid for gender differences and all educational groups.
However, the data also indicate that in Portugal, the economic return on education
seems to vary significantly (see Table 5.2). According to the existing studies, the
economic return in Portugal for a similar educational qualification is not only very
heterogeneous, but also seems to have increased during the system’s substantial
expansion. This means that the wage benefits from educational qualifications have
been decreasing for those getting lower wages and increasing for those getting well-
paid ones. This suggests that the economic benefit of education has been declining
during the last two decades for those located at the lower end of the pay scale.

Table 5.2. Summary of estimates of rates of return to schooling in Portugal (%)

Study Period Rate of Return

Kiker and Santos (1991) 1985 9.4–10.4%

Vieira (1999) 1986–1992 7.5%–8.2%
Martins and Pereira (2004) 1995 12.6%
Machado and Mata (2001) 1982–1994 1.3–9.2%; 0.4–11.3%
Hartog, Pereira and Vieira (2001) 1982–1986–1992 5.3%–5.5%–6.4%

Source: Figueiredo et al. (2013)

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The good prospects for university graduates also persisted in terms of employment
opportunities. In the 1980s and 1990s, the levels of unemployment by educational
category converged, with a significant reduction for the lowest qualified groups and
a slight increase in the number of unemployed with higher education qualifications,
from below 2% to around 4% (still the lowest among all groups). A careful analysis
of patterns of job creation shows that the Portuguese labour market is characterised
by high job rotation, with high job creation/destruction occurring for all groups of
workers regardless of their level of schooling (Cardoso & Ferreira, 2001). However,
both the raw and net rates of job creation were persistently higher for workers with
higher education degrees than for those with lower levels of schooling between
the mid-1980s and the late 1990s, precisely the period of greatest higher education
expansion. Hence, the slight increase in graduate unemployment did not result from
a decline in the willingness of companies to recruit higher education graduates, but
rather from the labour market’s incapacity to absorb the massive flow of graduates.
However, this kind of success story has started to become more complicated in
recent years (Figueiredo et al., 2013). Policy makers and public opinion in general
showed growing concern that the massive expansion of higher education eroded
the profitability of a higher education degree, leading to graduate unemployment
and the decline of the wage premium normally associated with higher formal
qualifications. These concerns have become even more significant over the last
decade, and especially in the aftermath of the 2008 financial and economic crisis. The
Portuguese economy has had a mediocre performance since 2001, which is reflected
in a growing difficulty with creating jobs and a rapidly growing unemployment
rate. The current situation has affected an increasing share of graduates, suggesting
that their once rather protected position is being eroded and that there is a growing
inequality among the fate of higher education graduates (see Figueiredo et al., 2013).
This erosion is more likely to have affected those graduates from less prestigious
institutions, such as those coming out of the once-booming private sector. Overall,
one can say that higher education graduates are still, on average, privileged among
the Portuguese population, but there is a growing inequality among them. If higher
education is still a very effective way of promoting social mobility, its effectiveness
seems to have become increasingly variable with massification of the system
(Teixeira et al., 2014c).

3.4. Demographic Patterns

As in many European countries, Portugal has experienced significant changes in

its demographic patterns in recent decades, namely through an ageing population.
Although this process was delayed by the late process of economic and social
modernisation, eventually the country faced a sharp decline of fertility rates that has
had a major impact in the population dynamics. Factors such as rising income levels,
cultural changes that shaped contemporary families, the growing feminisation of
the labour force, and the growing qualification of women, have all contributed

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to increasing the opportunity cost of children and changing families’ preferences

regarding children from quantity to quality.
The impact of these demographic changes in enrolment was not only delayed
by the late modernisation of the Portuguese economy but also by the peculiarities
of mass education in Portugal. The expansion of compulsory education and the
late massification of secondary education have long masked the decline in fertility
patterns. Moreover, the late expansion of higher education had prevented many
from attending universities, and many of these individuals decided to take a second
chance when the system started to expand by the mid-eighties. Thus, until the mid-
nineties, higher education enjoyed a persistent burgeoning demand.
Although the signs of change were perceptible by the late nineties, most observers
either ignored or underestimated the impact that the demographic changes would
have in the demand for higher education (Teixeira & Amaral, 2007). At that time,
the forecasts indicated that the decline in higher education levels would continue and
deepen in the following decade and a half. However, many trusted that improvements
in the effectiveness of secondary education in reducing its high retention and drop-
out rates would at least compensate for that demographic decline. This perception
was particularly prevalent in the private sector, which was regarded as the most
vulnerable to a change in demand due to the influence of higher cost and lower levels
of prestige on student preferences.
The reality has been more complex than those optimistic expectations and the
decline in fertility largely prevailed over any small improvements in the secondary
system. The last decade has been characterised by stabilisation and then a decline in
the age cohort of traditional higher education students that has particularly punished
the private sector, a major factor accounting for its current difficulties. The current
prospects indicate that the fertility decline will continue, though with less magnitude.
It is likely that there will be some stabilisation in this decade, though the persistent
decline in younger cohorts suggests that the demand will suffer another decline after
2020. Surely, this may be compensated for by an expansion and greater effectiveness
of secondary education, but the past experience is not very encouraging in that
respect, thus, institutions should not put too much trust in the ability of that factor to
compensate for further declines in demand.

4. DIMENSIONS OF THE PRIVATE–PUBLIC MIX

The changes in regulation mechanisms that characterised the recent decades have
also stimulated the privateness of many public institutions by enhancing their
autonomy (Middlehurst & Teixeira, 2012), their reliance on other sources of funding
and the adoption of some private-like management practices (Teixeira & Koryakina,
2013). These trends, also visible to a limited extent in Portugal, contributed to
making the boundaries between the public and private sectors less clear. However,
important differences persist in the way the private sector is regulated and funded in
Portuguese higher education.

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4.1. Source of Funding

One of the most obvious weaknesses of the private sector in many countries relates
to the fact that it is often far more expensive compared to the public sector. In the
public sector, students pay a moderate tuition fee or no fee at all, while they pay full
tuition fees in the private sector. In Portugal, and despite the introduction in recent
years of some degree of cost-sharing in public institutions (Teixeira et al., 2006b), the
difference is still significant between tuition fees in public and private institutions.
For this reason, there have been several initiatives to create public subsidies for the
private sector. Some legislation has established the principle of financial parity of
public and private institutions, either by direct subsidies to private institutions or
by scholarships given to students enrolled in private higher education, though most
of this has not been seriously implemented thus far due to persistent stringency in
public finances.
The current higher education law defines several aspects through which the
government may support private institutions. This support can be made through
a funding contract signed between the government and non-public institutions of
higher education. The aspects that can be included in that type of contract would
refer to student support systems and financial support for students with outstanding
merit. On the other hand, the government may also support private institutions in
their efforts to train academic staff or in their research activities, namely through
peer-reviewed research funding awarded on a competitive basis. Thus far, the
government’s contribution to the budget of private institutions has been small.
This establishment of “market-like” competition for students seems to be
clearly disadvantageous to private institutions because they are more expensive
and their social prestige is not very strong. The difficulties private institutions have
in competing with public institutions have been underlined by some studies that
tried to analyse the preferences of students. Not only are students clearly aware that
they would be paying substantially more in tuition fees at private institutions, but
they also doubt that these higher fees will be compensated for by a higher quality
of education or unique study programmes in relevant areas. The level of student
satisfaction regarding the institution and the study programme is higher among
public university students. Moreover, in the private sector, there is a large percentage
of students who are satisfied with the study programme but are less so with the
institution. This suggests that these students may have chosen a private institution
because their marks did not allowed them to enter a public institution. An analysis of
the preference of the students’ first choice corroborates those findings, demonstrating
that public universities are the first choice of students, followed at large distance by
public polytechnics, which present a slight advantage over private institutions.
The unfavourable position of the private sector regarding funding has been
worsened by the recent competition among private HEIs for other sources of funding
(Teixeira et al., 2014d). Thus, the last two decades have seen the development of
cost-sharing and revenue diversification in public higher education due to increasing

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financial constraints on public expenditure. The funding of public higher education

in Portugal has evolved towards a greater reliance on the institutions’ capacity
to find alternative sources for government transfers (see Teixeira & Koryakina,
2013). The main source among earned income has been the increasing role of
tuition fees, though other areas, such as research funding, EU programmes, and the
commercialisation of services, have all gained increasing relevance. This has led
public HEIs to become much more aggressive in finding other sources of revenue,
making it harder for private institutions to seek support from private donors and
companies. Also in this respect, the behaviour of public and private HEIs has
become more similar, though the former tend to be stronger competitors (in addition
to having a reliable source of public funding support).

4.2. Ownership

Private higher education institutions are established in Portugal as cooperatives

with a dual structure, i.e., an administrative and an educational branch. The former
owns the institution and takes responsibility for administrative and financial issues.
This part is also responsible for the recruitment of academic and non-academic
staff, after consultation with the educational branch. The educational branch handles
the scientific and pedagogical aspects, and therefore should enjoy full autonomy
to perform those functions. The educational branch has to have legally approved
statutes that clearly state its pedagogical and scientific mission. The statutes should
also specify the implications of the autonomy of the institution, namely by defining
the internal organisation of the institution. The legal requirements regarding the
organisational structure of the academic branch of any private institution include
the existence of a Rector or President, a Director or an Executive Committee, and
the establishment of a scientific and a pedagogic councils. The law also requires the
establishment of mechanisms for the participation of students and academic staff in
internal decision-making.
One of the critical aspects in the organisational life of any private institution is
the risk of interference from the administrative and financial branch in educational
affairs. In order to minimise that risk, those occupying any position in the
administrative branch cannot be part of any of the directing bodies of the educational
branch. Despite this formal separation between the two branches of the institution,
there are clear signs that both sides tend to negotiate informally whenever important
decisions are to be made, such as the establishment of a new school or the launching of
a new programme. Although the educational branch formally enjoys that autonomy,
it is very unlikely that it would be able to go ahead with any significant decision if it
did not count upon the support of the financial side.
Recent years have shown that this dual structure is often under severe strain. The
owners of the cooperative are often tempted to interfere in the daily management of
the educational branch, namely in times of difficulties, such as the ones that have
characterised the last decade. The deepening of the financial difficulties faced by

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many institutions has frequently led to a growing rife between the academic and the
administrative branches of many institutions. In some cases, the struggle reached
such a level that the Ministry had to intervene in order to assess to what extent the
scientific and pedagogic autonomy of the educational branch was being curtailed
by interference of the owners of the institution. In some cases, institutions may
risk seeing some of their programmes closed down or even the withdrawal of the
authorisation to operate. Moreover, since 2008, development of the accreditation
system has placed private institutions under even greater pressure and it made more
difficult for them to devalue academic sustainability and credibility vis-à-vis financial
concerns, as the current regulatory framework is far more demanding regarding the
human and physical resources needed to supply higher education programmes.

4.3. Autonomy

In order to be legally recognised, an institution needs to fulfil several academic

requirements. The current requirements for the establishment of a private institution
include a minimum number of degree programmes from different scientific areas,
some of which need to be in the hard sciences. Those institutions also need to have
sufficient and qualified material and human resources. Regarding the resources
available for an institution’s activities, the law requires suitable buildings, visibly
applied research and cultural activity, and a staff/student ratio for all cycles. This
has been enforced at far higher levels in recent years due to the establishment of the
accreditation system, which has led to the auditing of all programmes by annual sets
of disciplines.
Private institutions have often complained about their lack of autonomy
regarding the Ministry of Higher Education. According to the law, the government
has a variety of instruments to oversee the activity of private institutions. It is the
responsibility of the government to check that each HEI fulfils the legal requirements,
namely by analysing the statutes regulating the life of private institutions. Any new
study programme to be launched or any modification of existing programmes needs
to receive prior approval from the government and from the accreditation agency.
The government also has significant control over the access mechanism, namely by
establishing the numerus clausus for first-year students (similar to what happens for
public institutions).
To a large extent, private institutions enjoy less autonomy than do their public
counterparts. This situation seems to be the result of several of the features that
characterised the development of the private sector. On the one hand, there is the
fact that the private sector includes some of the newest institutions in the system.
Public institutions have probably benefited from the fact that they are much
more entrenched in the system. In fact, even among the public sector, there have
been differences, with the more recent polytechnic sector traditionally enjoying
less autonomy compared to their university counterparts. On the other hand, the
mushrooming of institutions has stimulated some mistrust among stakeholders and

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policy makers towards many private institutions. In the heyday of the private boom,
the lax approach of several governments weakened the effectiveness of the regulatory
framework. However, a more demanding stance in recent years has proven to be
more complicated for private institutions to circumvent and the aforementioned
changes in the quality assessment system have made it far more difficult for private
HEIs to play with the system.

4.4. For Profit or Not

At the moment, the legal framework prevents the development of for-profit private
higher education. Private institutions need to be established as an educational
cooperative, which by definition is a not for-profit institution. The restrictions also
apply to any foreign or distance learning institutions that would envisage operating in
the country on a for-profit basis. In order to be legally recognised, their programmes
require prior approval, and for-profit programs would be denied by the nature of the
institutions granting the degree. The current conditions do not seem likely to promote
a change in the present situation. The major factor that, at the moment, would work
as a deterrent would be the decline in demand that has already placed not-for-profit
institutions in a very difficult situation. With the current situation of excess supply,
it does not seem that there is a high priority for allowing the development of another
sector. With the exception of a few niches (such as postgraduate programmes
in business sciences), there are not many possibilities of growth for this type of
institution.
Moreover, most stakeholders seem skeptical towards allowing for-profit
institutions to develop in the educational sector. However, and as observed
elsewhere, when for-profit institutions are not legally authorised, many non-for-profit
institutions end up adopting a behaviour similar to that, particularly when facing a
rather lax regulatory framework. This is visible when private institutions focus on
seizing market opportunities, frequently mimicking each other’s programmes and
not corresponding to a consolidated academic strategy.

4.5. Quality and the Rise of Accreditation

The expansion of the higher education system, and in particular of the private sector,
gave increasing prominence to quality issues in Portuguese higher education. There
were fears that the rapid expansion would deteriorate the average quality of the
education provided, especially in the mushrooming private sector. Thus, in 1986, the
Basic Law on Education established that the system should be assessed regularly and
in 1988, the Law on University Autonomy required the government to submit to the
Parliament a proposal for a law regarding quality assurance of the activities in higher
education, though the process dragged on. By 1993, the public universities launched
the process of quality assurance, assessing study programmes in a two-phase
methodology (self-evaluation followed by a peer review visit). This process led to

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the Law on Evaluation of Higher Education of 1994 and started the first cycle of the
evaluation of universities (1995–2000), which included only the public universities
and the Catholic University. The second cycle of evaluation (2000–2005) included
all higher education institutions.
It took much longer to launch the evaluation process in the other sectors of higher
education, namely in the private sector. Many in this sector regarded the evaluation
system as biased towards the public sector and as an unnecessary interference of the
regulatory powers. The lack of evaluation of the private sector did not help to change
the public perception that the system was dominated by low-prestige institutions.
Eventually, all sectors of higher education organised themselves for the creation of
their own evaluation agencies, which were established in 1998 with a coordinating
body for the sector’s agencies – the National Council for the Evaluation of Higher
Education (CNAVES). There were four evaluation agencies for quality assurance,
each responsible for the organisation of the external evaluation of higher education
institutions in the corresponding sector, including one for private universities and
one for private polytechnic schools.
In the early 2000s, some erosion of trust was already visible due to the lack
of consequences of the system, despite public awareness that the very rapid
expansion of the higher education system had happened alongside some decline
in quality. In 2005, the government commissioned the European Association for
Quality Assurance in Higher Education (ENQA) to undertake a review of the
quality assurance system and announced during the review process that the existing
system would be dismantled and replaced by a new accreditation system in early
2007. The agency has been operational for six years and is responsible for the
evaluation and accreditation of both the institutions and their study programmes.
The experience has convinced many institutions that the quality system is far more
stringent compared to the previous ones, especially private ones, leading many to
close down programmes or having them be closed by the accreditation body.

5. THE ROLE OF PHE IN PORTUGAL – EXPECTATIONS AND OUTCOMES

In the mid-eighties, the idea of significantly increasing the role of the private
sector gained strong political support in Portugal. The private sector was seen as
capable of promoting a supply of study programmes that was better balanced from
a geographical and disciplinary perspective and was more suitable to labour market
needs. In addition, its expansion was possible with minor cost to public finances.
Three decades later, it seems appropriate to see to what extent these expectations
have been fulfilled.

5.1. Expansion and Massification of Undergraduate Education

One of the main motivations for governments to allow the development of a private
sector is that it makes possible the expansion of supply with little or no direct cost

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to public budgets. This factor was very important in Portugal since the country was
facing a difficult economic situation in the late seventies and early eighties, and
several governments had to adopt stabilisation programmes under the guidance
of the IMF. Thus, private higher education was increasingly regarded as a cheap
instrument to develop the system and enhance the much-needed qualification of the
country’s labour force.

Table 5.3. Growth of enrolments, total and by sub-sector4

1971 1981 1991 2001 2011

No. % No. % No. % No % No. %

Public 43.191 87.3 64.659 76.8 103.999 47.0 176.303 44.5 197.912 50.7
Universities
Public 2.981 6.0 12.195 14.5 31.351 28.7 108.486 27.3 106.674 29.1
Polytechnics
Private 3.289 6.7 7.319 8.7 51.430 24.3 111.812 28.2 78.699 20.2
institutions
Total 49.461 100 84.173 100 186.780 100 396.601 100 390.273 100

Source: Ministry of Education and Science – Portugal

From the seventies onwards, the system generally doubled its size each decade,
moving steadily away from its original elitist character. Growth accelerated at the
turn of the 1990s, becoming a problem for governments from an administrative
and financial point of view. The growth of enrolments per sector also highlights
important structural changes in the student population. As late as the early 1980s,
public universities overwhelmingly dominated the higher education system. A decade
later, the non-university sector was already absorbing a significant proportion of
enrolments, and at present, the vocational public sector enrols more than one-fourth
of the total system and in the private sector, non-university enrolments represent
over 50% of that sector.
In fact, from the mid-eighties to the mid-nineties, private higher education
became the fastest-growing sub-sector. The analysis of enrolment growth during
the last decades confirms the profound transformation of the system during that
period, as well as an overall pattern of rapid expansion. However, after an explosive
expansion, the private sector seems to be in recession relative to the public sector.
The stabilisation, followed by a slight decline in the number of applications to higher
education, plus the steady expansion of public higher education, has reduced the pool
of potential candidates to private HEIs. The decline started to affect more private
universities but then spread to the whole sector and to public institutions as well,
leading to tight competition for students. The vocational part of the private sector
has initially been more insulated from the phenomena of declining demand due to

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its disciplinary profile that is less concentrated on the saturated areas of business
and other social sciences, in addition to its more disperse nature, geographically
speaking.

5.2. Regional Diversification of the System

There is a widespread conviction that the ‘market’ will be more effective than
will state regulation in promoting diversity of higher education systems, both in
terms of institutional types, of programmes and activities. More recent research
in higher education has questioned this embedded belief (Teixeira et al., 2012). In
the specific case of countries where a late process of privatisation played a role in
the massification process, there are indications that private higher education has
had an overall negative effect on the diversity of the system (Teixeira et al., 2013).
Being highly dependent on ability to pay, the burgeoning private sector tended
to be concentrated in the wealthiest areas of the country and focused on popular
programmes with low investment costs.
The analysis of enrolments indicates that the private sector presents a much
more concentrated picture in its regional and disciplinary distribution (see Teixeira
et al., 2013). Both the public and private sectors are present in all major regions of
the country, though in the private sector, the presence in some regions is minimal.
The studies available indicate that the private sector concentrated more than half of
its supply in one region (around the capital of the country), while the same region
represents only around a third of the supply of the public sector. This high degree
of concentration of the private sector is reinforced by a strong concentration in the
second main region of the country. In contrast, the public sector has a far more
diversified distribution from a regional point of view, not only regarding the main
region but also among the regions with fewer students. This pattern follows that
found in many systems in Europe (Teixeira et al., 2014).

5.3. Disciplinary Composition and External Efficiency of the System

The pattern of concentration of the private sector in the regional dimension is largely
confirmed in terms of the scientific disciplines offered. Private HEIs are significantly
concentrated in low-cost and popular social sciences, such as law, economics and
business. In fact, even in terms of low cost areas, these institutions do not seem to
invest in those with more depressed employment prospects. On the other hand, the
presence in more technical and costlier areas is significantly lower than that of the
public sector. The only apparent exception is in the field of health. Nevertheless, this
area mainly includes the nursing schools, which have a large private participation
and largely existed prior to the recent boom of the private higher education sector.
Frequently, these are also projects linked to religious institutions that have given a
lower priority to market demands and profit stimuli.

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In a recent study, we analysed the issue of programme diversity by looking at the

Portuguese system (Teixeira et al., 2011). Our results suggest that private institutions
are clearly more specialised than are public ones in the type of programmes that
they offer, though over time, we have observed a pattern of some convergence
between both sectors in terms of the level of diversification. Private HEIs therefore
seem more likely to either duplicate what public institutions are doing or to expand
through low-cost courses in areas with strong demand. Moreover, they tended to
offer a low-quality, low-cost product that maximised short-term benefits, instead of
a product that in the long run would offer them better prospects for survival. Even
when private institutions achieved some credibility, they avoided certain areas of
higher education provision, as well as certain types of students, replicating a narrow
version of public sector supply instead of complementing it. The public sector was
left to cover more costly or risky areas. Thus, governments may count on the private
sector to expand the system, but it is less likely to increase diversity.
When the pattern of demand shifted at the beginning of the twenty-first century,
one of the strongest possibilities for the private sector to overcome the situation
was to diversify their disciplinary supply. Expansion in the health area allowed
the private polytechnic sector to remain far more stable compared to the private
university sector. This was due to the fact that the decline of enrolments in the two
major traditional areas, education and social sciences, as well as in commerce and
law, was largely compensated for by an increase in the area of health and social
protection. This development confirms that the behaviour of the institutions has
strong isomorphic characteristics. When an institution starts a new programme that
attracts students, several other institutions jump at this new opportunity looking for
a short-term escape from bankruptcy and proposing new programmes irrespective
of the absence of consolidated academic staff, facilities or libraries. There has been
the ‘management’ race, the ‘environment’ race, and more recently the ‘health’ race.
Our analysis also indicated that although institutions seemed to respond to market
stimuli and competition appeared to be a powerful force in stimulating institutional
behaviour, its effects were modulated by the peculiarities of the HE sector and its
high degree of government regulation, which were often particularly strong regarding
the private sector. The empirical results obtained also suggested that with public
institutions, the larger their size, the more diversified they tended to be (Teixeira
et al., 2011). Within private HEIs, besides the positive effect of size, there was an
important joint effect of the HEIs’ category and maturity, as older universities seem
to be the most diversified institutions in the private sector.

5.4. Responsiveness of PHE to Changes in Demand

The combined effects of more demanding standards for entering higher education
with the sustained capacity increase of the public sector, the consistent decline in the
number of candidates due to demography and the preference of students for the public

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P. Teixeira

sector have created a difficult situation for the private sector. This convergence of
effects has created a difficult context for the private sector that has faced decreasing
enrolments since the mid-1990s. The situation is generally complicated for most
institutions, but there are some differences to be noted. Private polytechnics seem
to be dealing better with this adverse situation than are private universities. This is
due to differences in the disciplinary and regional distribution of both sectors. The
situation is serious as some private universities are filling only a quarter or less of
their numerus clausus. The initial reaction of private institutions to this decline in
enrolments has been a cautious one, and included not enforcing minimum marks
in entrance examinations. In 2000–2001, the Minister decided to penalise those
institutions that did not set minimum entry marks by reducing their numerus clausus,
and for the 2000–2001 academic year, the number of vacancies in private institutions
fell below the number of public vacancies.
However, and despite the fact that many institutions have been struggling to
survive, this has not been sufficient in several cases and more than a dozen institutions
have already disappeared in recent years. Several of those cases correspond to the
closure of autonomous campuses of private institutions that were located in more
peripheral areas of the country. If this process persists, it is likely to reinforce the
aforementioned documented stronger regional concentration of the private sector in
the two main urban areas of the country. This also illustrates the limited potential
for private institutions to diversify their activity from a geographical point of view,
especially due to the regional expansion of the public network. The closure of these
institutions also points out the weaknesses of a sector that is largely composed of
small institutions. These find it hard to develop alternative programmes that may, at
least in part, compensate for the decline in existing programmes. Although this is
happening to larger institutions as well, their more diversified supply may help some
of them to better resist this problem.

5.5. Postgraduate Education and Research

One of the aspects that shows the persistent fragilities of private higher education
is its poor performance regarding postgraduate programmes and research activities.
Due to its late expansion, the Portuguese system has been largely focused on
undergraduate training. In recent years, this has changed, largely motivated by the
maturation and saturation of the undergraduate student market. The development of
postgraduate programmes became a strategy for many institutions to compensate
for the decline in undergraduate enrolment. However, whereas public institutions,
especially public universities, have been showing signs of slowly but steadily
diversifying their activities to postgraduate programmes, private institutions do not
seem to present many changes in this respect. Polytechnics are not allowed to supply
postgraduate programmes unless in collaboration with another university.
Most universities remain largely concentrated in undergraduate training.
Postgraduate programmes are still a rather marginal activity of the private sector.

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 Regulatory Changes and the Public-Private Mix

This is largely consistent with their low level of research activity and is unlikely to
be easily changed since most institutions do not have a sufficiently qualified staff to
develop those programmes, which are far more demanding in terms of academic and
legal requirements than are undergraduate programmes.
Traditionally, the private sector had less qualified staff, even though it has often
recruited a number of retired professors from the public sector. Moreover, the
situation has been worsening due to the current difficulties. In fact, qualified staff
is more expensive and faced with significant financial difficulties, many institutions
were tempted to make cuts in what their main expenditure – staff. Even if this could
temporarily alleviate the present problems, it was certainly hindering other possible
long-term strategies to overcome their embattled situation. This has become even
more complex given the enhanced effectiveness of the regulatory mechanisms
of quality assessment. Hence, many private institutions have been under greater
pressure to recruit more qualified staff. This was made possible by the combination
of recruitment constraints in the public sector due to the crisis affecting public
finances since the early twenty-first century and to increases in the number of new
PhDs.

5.6. Economic and Social Development

The slow development of the Portuguese higher education system meant that until
recently, it was a very elitist system, which was clearly reflected in the socio-
economic composition of enrolments. Until the 1970s, the student population
there was a massive over-representation of those groups having higher cultural
capital and an under-representation of those from deprived backgrounds. In the
following decades, this picture changed, with increasing access for students from
families having very limited qualifications. However, the families with formal

Table 5.4. Distribution of enrolments by level of schooling of the household 4 (%)

1997 2004
polytech.
polytech.

Level
univers.
Private

Private
univer.
Public

Public

Public

Public
63/64

91/92

Total

Total

Illiterate/ 35.2 25.3 39.3 53.3 47.2 45.0 30.0 50.0 27.2 34.9
Primary
Secondary 27.4 19.2 35.7 36.3 34.4 35.4 29.2 29.6 29.4 29.4
Voc. degree 8.7 8.1 6.5 – – – –
Higher education 27.5 18.1 24.7 10.4 18.3 13.1 40.8 20.4 43.4 35.7
Other/NA 1.2 27.1 – – – –

Source: Vieira, 1995; CNASES, 1997; DGES, 2005

103
P. Teixeira

qualifications that were well above the average still retained some of their traditional
prominence.
Changes to the social composition of the student population were not
homogeneous across the sub-sectors. First, public universities have a more
homogeneous population in terms of cultural capital than do public polytechnics,
suggesting that students from families with lower qualifications prefer shorter
vocational degrees. Second, there are no major differences between public
universities and private institutions in terms of cultural capital of origin.

Table 5.5. Enrolments by level of household income, 2004

Household income € Public univ.% Public polytech. % Private institution % Total %

Less than 720 13.6 20.1 11.2 14.8
721–1440 28.5 38.8 26.0 30.7
1441–2160 21.6 22.2 19.3 21.1
2161–2880 15.2 10.9 16.9 14.5
More than 2880 21.1 8.0 26.6 18.9

Source: DGES, 2005

The analysis of enrolments by level of income mostly confirms the influence of

cultural capital on enrolment patterns. The university–polytechnic divide apparently
presents a clearer difference between the socio-economic family origins of the
students in the Portuguese higher education system than does the public–private
divide. It is hardly surprising that the percentage of students enrolled in private
institutions is lower than in public institutions in the lowest incomes and higher in
the highest incomes since tuition fees are significantly more expensive in the private
sector. Full-cost fees, paid by students enrolled in private institutions, significantly
hamper the access of lower income groups to private institutions, though their
proportion in terms of enrolments is still surprisingly high bearing in mind those
financial constraints. However, the socio-economic composition of students
enrolled in public universities and private institutions remains quite similar. Public
polytechnics are clearly more socially inclusive than are public universities. This
suggests that middle and upper class groups with higher cultural capital retained a
good grip on access to the most prestigious institutions and programmes (see also
Vieira, 1995), and that some middle and upper class families with lower cultural
capital are using private universities to culturally promote their children.

6. MISSED OPPORTUNITY? EVALUATING THE PORTUGUESE

EXPERIENCE WITH PRIVATE HIGHER EDUCATION

Portugal has traditionally presented very low levels of educational qualifications

due to a variety of factors. Despite some efforts, the qualification levels grew slowly

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 Regulatory Changes and the Public-Private Mix

until the mid-twentieth century. The 1974 Revolution caused a dramatic change and
accelerated pressures for the expansion of higher education. However, the lack of
stability and financial restrictions hindered the rapid development of a largely public
system of higher education. By the mi-eighties, the system was still very much an
elite one and the context became favourable for the development of the private sector
as a major axis of the massification of the system.
Until the early eighties, the size of the private sector was very small, but the
pace of implementation accelerated after the mid-1980s. Thus, this sector attained
the fastest growth rate in a system undergoing accelerated expansion. Various
forces converged for that rapid development. The political context was clearly
favourable because there was significant social pressure and the development of
the private sector did not create an additional financial burden on the stringent
public budgetary possibilities. The social demand was strong, largely fuelled by
persistently high rates of return and enviable prospects in terms of employment
for most university graduates. The delayed expansion of secondary education also
postponed the decline in enrolments and kept the demand buoyant for more than a
decade.
The booming of the private sector developed amidst significant public mistrust.
Many institutions seemed too tempted to profit from the unfulfilled demand instead
of a careful and consistent development of solid academic institutions, and instead
focused on the most popular and less costly programmes, often using staff from
public institutions on a moonlighting basis. Thus, public opinion started to perceive
these institutions as a costly and low prestige alternative to public institutions. These
perceptions enhanced the public’s ambivalence towards the private sector. On the
one hand, it seldom used all of its regulatory powers. On the other hand, it restricted
the autonomy of private institutions to a level that was lower than that enjoyed by
their public counterparts. This situation did not improve with the growing problems
in many private institutions that showed how significant the interference of the
owners in the academic management was in some institutions.
The advent of the private sector came with high expectations for its role within the
Portuguese higher education system, namely in terms of the latter external efficiency
and responsiveness. Two decades later, many of these expectations had hardly
been fulfilled. The private sector was an important instrument in the massification
of the system, but only to the extent that the public sector was not yet capable of
fully absorbing the demand. Once the public sector developed sufficiently, the
life of the private sector became increasingly more complicated, namely because
of its unfavourable position regarding prestige and cost vis-à-vis the public sector.
The private sector also contributed little to the expected disciplinary and regional
diversification of the system, namely because most institutions were so eager to
capture the larger portions of the student market. This contributed to some difficulties
with transitioning to the labour market in some disciplines. Due to its fragilities, the
contribution of the private sector was significantly weaker in postgraduate education
and almost absent in research capacity.

105
P. Teixeira

In recent years, contextual and intrinsic factors converged to place private higher
education in a very difficult position. The combined effects of more demanding
standards for higher education (with the introduction of accreditation), the increase
of the public sector, the consistent decline in the number of candidates due to
demography and the preference of students for the public sector have created
significant difficulties for many institutions that have been fighting for their survival
and to remain financially and academically viable.
The Portuguese experience shows that private higher education deserves to
be approached with some care by policy makers. It is an effective instrument for
quickly increasing enrolments, though it needs to be managed in order to avoid
opportunistic behaviour. If loosely regulated, private institutions will not only create
distortions in the system, but also damage their future prospects as an important
part of the higher education system. In order to stimulate a credible and sustained
private supply, the government should monitor its development in a way that neither
interferes with its autonomy, nor allows for excessive growth of institutions that
will tend to cannibalise each other through institutional isomorphism. Similar to
in other cases, the Portuguese experience also shows that the private sector more
often duplicates some parts of the public supply, and some activities will hardly be
sufficiently attractive to the former and will remain a major mission of the public
sector. Altogether, these outcomes confirm the view that pver the long-term, the
private sector does not benefit from political favour or hostility. Rather, it needs to
be addressed as an inevitable feature of modern higher education systems.

NOTES
1
Parts of this chapter have been presented in an earlier version in Teixeira (2012).
2
The ideological changes liberated by the revolution are well reflected in the Constitution drafted after
the revolution (1976), which recognised the right of all the Portuguese to education, as well as the
freedom to teach and to learn. This played a strong role in the development of the Portuguese private
higher education system.
3
However, the existence of the university was short due to internal strife, which eventually led
the government to intervene. In mid-1986, the Minister of Education recognised two new private
institutions, one in Lisbon (Universidade Autónoma Luís de Camões) and the other in Porto
(Universidade Portucalense), which were established by dissidents from the Universidade Livre. Later
that same year, the Minister withdrew formal recognition from Universidade Livre.
4
The data presented in this and the following tables in terms of enrolments refer to total numbers. Since
the level of postgraduates and part-time students are negligible for the period analysed, the typical
student is mainly enrolled in a full-time undergraduate programme.

106
 SUNWOONG KIM

6. PUBLIC-PRIVATE MIX OF HIGHER

EDUCATION IN SOUTH KOREA

1. INTRODUCTION

South Korea (Korea hereafter) has a substantial private sector participation in higher
education. Out of 432 higher education institutions that exist in 2012, 376 institutions
(or 87%) are privately owned.1 The importance of private sector contribution can be
seen in term of number of student enrolment as well. There are about 3.73 million
students enrolled in higher education institutions in Korea, and about 76% of these
students, 2.83 million students are enrolled in private institutions. Moreover, private
sector funds (mostly in the form of tuition payment) about three quarters of the total
amount spent on higher education, which is 2.6% of GDP in 2010.
Currently, Korea has one of the highest participation rates in higher education
in the world. The current participation rate for higher education (including junior
colleges) exceeds 80% for the age cohort of twenty years old. The participation rate
for type-A tertiary education (four-year universities) is above 50.
Korea’s massification of higher education is relatively new, however. As late as
in 1980, the enrolment in higher education was only about 400,000%. The rapid
expansion of higher education follows the rapid expansion of secondary education,
which follows the rapid expansion of primary education. Such a rapid expansion of
education would not have been possible without the active participation of private
sector. In particular, the expansion of Korean higher education system heavily relies
on the active participation by the private sector.
The massification of HES occurred with the two major policy changes since
1980s. The first policy was the education reform in 1980 which drastically increased
the admission quota to higher education. However, at that time the government still
maintained very heavy regulations over the system including the admission quota for
each department at the individual institution level. The 1980s in Korea was the period
of political transformation. The military dictatorship gave away to democratization.
In 1987, full democracy through direct election started to take root after a long
period of anti-dictatorship movements by university students and citizens. With the
democratic regime, more pluralistic and interest group politics started to replace the
top-down approach to policy making that was common during the dictatorial regime.
Consistent with this socio-political trend, the education major education reform in
1995 emphasized deregulation and market competition. It virtually eliminated the
admission quota. The establishment and operation of higher education institutions

107
S. Kim

were much more relaxed. The result was another wave of major expansion in higher
education.
However, unlike many countries in which rapid expansion of higher education is
absorbed by the large scale emergence of low-quality private universities, Korea’s
private universities boast many top-class universities which effectively competes
with not only domestic elite public universities, but with world class research
universities, as demonstrated by in the world university rankings. Currently, some of
Korea’s private universities enjoy excellent academic reputation and secure funding
comparable to top public universities.2
The prominence of private institutions has been a long-lasting tradition in Korea.
The existence of established elite private universities contrast sharply to the situation
in many countries in which private higher education is relatively new and its role in
higher education is to absorb the overflow demand of the recent expansion of higher
education. While the Korean government was established in 1948 and the many
public universities were in the early 1950s, several private universities have histories
of over 100 years.
The share of students in private institutions has been high throughout the
history of Korean higher education system. For example, even in 1960, when the
number of students enrolled in type-A tertiary education institutions in Korea was
less than 100,000, the enrolment share in private universities was above 65%. The
expansion of higher education happened concurrently in both public and private
providers. However, during the massification phase since 1980 of the demand for
higher education by less qualified students has been absorbed to large extent by
the junior college system that is mostly private, and thereby heavily dependent on
tuition revenue. This phenomenon that private sector covers lower quality higher
education (with relatively high user cost) is quite similar to the pattern found in
many developing countries in which the private sector covers the overflow demand
of higher education not met by elite public universities.
As the number of people in the age cohort that traditionally attend higher
education is expected to decline in the near future, the demand for higher education
is most likely to decrease. Given already very high level of participation rate, the
smaller population will be directly translated to decreasing enrolment. The decline
in demand will create substantial financial hardship for many private institutions that
rely heavily on tuition revenue. The closure or merge of some of those institutions
will be very likely in the near future.
The recent policy initiatives blur the dichotomy between public and private
universities. For one thing, the government has created independent boards of
trustees to govern a few national universities, including the country’s flagship
national university, Seoul National University. While it is too early to tell how this
plan work out, the need to introduce dynamism for innovation in the governance
structure of public universities in order to make the Korean public universities to
be more efficient and globally competitive have been widely recognized. At the
same time, the newly enacted private school laws (that govern all private schools

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 Public-Private Mix of Higher Education in South Korea

including universities) allow the government and stakeholders such as professors

and students to be represented in the governing bodies of private universities. Such
proposal was motivated by the current government’s desire to make private schools
more responsive to the needs of teachers and students and be more transparent and
free of corruption.

2. SIGNIFICANCE OF PRIVATE PARTICIPATION IN KOREA

The significance of private participation is pervasive in all parts of the Korean higher
education system including type-A tertiary education,3 type-B tertiary education,4
and open universities. Even in the type-A tertiary education sector in which private
sector participation is the lowest (as one might expect), more than three quarters of
students are enrolled in private universities, and more than 80% of universities are
private.
Moreover, unlike in some countries in which private higher education is relatively
a recent phenomenon, the participation of private sector in Korea’s higher education
has a long tradition. In some countries, private universities are inferior to their
public counterpart in terms of the quality of students and faculty. In Korea, many
of private universities have a long history (some are over 100 years) with great
academic and social reputations. The private higher education institutions are
competing with public counterpart in virtually all part of their operation. That is, the
private institutions effectively compete not only among themselves but with public
universities by attracting quality students, faculty, and private funding. The major
differences between the public and private institutions in Korea are their internal
governance structures and the level of funding provided by the government.
The Korean higher education system is comprised of four major sub-systems. The
most important sub-system is the comprehensive system of universities that offer
diverse fields of studies from accounting to zoology and grant Bachelors, Masters,
and Ph.D. degrees. The number of students enrolled in universities is 2,103,958
(56.6% of all higher education enrolment) in 2012. There are 189 universities in
the same year. Among them, only 31 universities are national universities and 2
are city universities, and the remaining 156 are private universities. These private
universities enroll 78% of the 2.10 million university students.
The second most important sub-system (in term of enrolment) is junior colleges.
Typically, they grant Associate Bachelor degrees with two to three years of full time
schooling. Many of the junior colleges offer courses in occupational training such as
nursing, computer repairs, and so on. Many students in junior colleges may not think
the schooling there is their final formal education, and try to transfer to universities
to finish their bachelor’s degree if possible. However, Korea’s junior college system
is radically different from the U.S. community colleges. While the American junior
colleges rely more on public resources, Korea’s junior colleges are almost exclusively
rely on private resources (mostly by tuition revenues). The U.S. community colleges
cater many part-time students (with jobs), but overwhelming majority of student in

109
S. Kim

Korean junior colleges are full-time. In the U.S., the high subsidy provided by the
government make them a “good education bargain,” because their tuition levels are
relatively lower than say major state universities. However, Korean junior college
students are mostly full-time students who aspire to go to a university, but fail
to do so because of their lack of academic preparation. Without any government
subsidy, their tuition level is relatively high compared to their education quality, and
consequently, they represent the second-tier system in higher education hierarchy. In
2012, the enrolment in junior colleges is about 769,888. The junior college system
is dominated by private sector. Out of 142 junior colleges in 2012, 133 are private
institutions, and they enroll more than 95% of the students of the sub-system.
The third major sub-system in Korean higher education is open universities
including the National Air & Correspondence University, and 17 Cyber universities.
Depending on the program, they offer Associate Bachelor, Bachelor, and Master’s
degrees. The National Air & Correspondence University was established in 1972
as a part of the Seoul National University. At that time, the totalitarian government
in power actively suppressed the expansion of the universities, and tried to absorb
the burgeoning demand with the open access university by offering instruction
via radio and TV. In 1982, it became an independent national university. With the
recent development of information and communication technology, more programs
are offered through internet. Currently, it offers masters as well as undergraduate
degrees. In addition to the national university, there are seventeen private cyber
universities offering associate bachelor degrees and bachelor degrees. All these were
established since 1995 when the government eased the entry requirement of higher
education institutions. The National University enrolls about 254,652 and the 17
private cyber universities enroll about 150,000 in 2012.
The remaining system is composed of 10 National Teachers Universities and a few
public and private industrial universities (polytechnics). The Teachers Universities
are currently four-year institutions. However, most of these institutions were normal
schools at high school level until 1962. In the 1950s when the elementary school
system experienced a remarkable expansion. The enrolment in primary schools
was less than 2 million in 1945, but it increased to almost 6 million at the end of
1960s. As the government wanted to produce teachers very quickly in order to meet
the escalating demand for primary school education, it established several normal
schools throughout the country. They were heavily subsidized by the government in
order to attract able young people who otherwise would not been able to go to high
schools into the teaching profession. Over time, the qualification for teachers has
improved, and these institutions turned into two-year colleges in early 1960s and
four-year universities in 1980s. However, the heavy subsidy to these institutions by
the government continued until now. In 2012, their total enrolment is about 20,000.
In addition to Teachers Universities, there are a few private Industrial Universities
enrolling about 100,000 students in 2012. They typically started out as company-
sponsored training facilities or government-sponsored job-training and re-training
facilities, and recently converted into higher education institutions. Many of these

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 Public-Private Mix of Higher Education in South Korea

institutions are not regulated by the Ministry of Education, but by other government
agencies such as the Ministry of Labor and the Ministry of Telecommunication,
and so on. As such, many of the industrial universities have the characteristics of
open universities with lax admission criteria and registration requirement. Recently,
some of more established industrial universities have been incorporated into regular
universities, while others eliminated.
The growth of private higher education more or less parallels the growth of
public higher education in Korea. Tables 6.1 and 6.2 show the number of institutions
and enrolments in public and private higher education institutions. In 1960, when
the enrolment in universities was less than 100,000, more than 65% of university
students are enrolled in private universities. During the late 1960s and early 1970s,
the number of public junior colleges increased substantially. The effort was driven
by the government’s policy to push for rapid industrialization, and many public
junior colleges that train technical workers were established during the time period.
The number of public universities has increased in early 1980, when many of the
public junior colleges converted into universities. The number of private universities
started to increase very rapidly in mid 1990s, when the government regulation to
establish new universities was substantially relaxed. More private junior colleges
were established when there was residual demand for higher education. For
example, during the 1970s many private junior colleges were established to meet
the burgeoning labor demand for technical workers. In early 1980s, more private

Table 6.1. Number of universities and junior colleges in Korea, 1952–2012

Universities Junior Colleges

Year Total Public Private Total Public Private

1952 34
1955 44
1960 52
1965 70 14 56 48 12 36
1970 71 15 56 65 26 39
1975 72 15 57 101 36 65
1980 85 20 65 128 36 92
1985 100 22 78 120 17 103
1990 107 24 83 117 16 101
1995 131 26 105 145 18 137
2000 161 26 135 158 16 142
2005 173 26 147 158 14 144
2012 189 33 156 142 9 133

Source: KMOE, Education Statistics Yearbook, various years.

111
S. Kim

Table 6.2. Enrolment in universities and junior colleges in Korea, 1952–2012

Universities Junior Colleges

Total Public % in Public Total Public % in Public
Year Institution Institution Institution Institution

1952 31,342
1955 78,649
1960 92,930 31,718 34.1
1965 105,643 25,964 24.6 23,159 4,699 20.3
1970 146,414 36,038 24.6 33,483 14,383 43.0
1975 208,986 56,830 27.2 62,866 18,998 30.2
1980 402,979 114,686 28.4 165,051 26,881 16.3
1985 931,884 243,378 26.1 242,117 22,956 9.5
1990 1,040,166 254,748 25.2 323,825 26,959 8.3
1995 1,187,735 295,941 24.9 569,820 21,413 3.8
2000 1,665,398 372,078 22.3 913,273 37,331 4.1
2005 1,886,639 400,668 21.2 853,089 36,153 4.2
2012 2,103,958 459,171 21.8 769,888 16,792 2.2

Source: KMOE, Education Statistics Yearbook, various years

junior colleges were established when several public junior colleges converted to
universities. During the early 1990s, more private junior colleges established to
accommodate increasing demand for higher education. Since 2000, the growth in
the number of private junior colleges stopped as the number of students in higher
education started to decrease as the number of college bound students decrease due
to the decline in birth rates in the previous decades and increasing proportion of
higher education enrolment advance to four-year institutions.
The financial contribution of private sector is also very significant in Korean
higher education system. Overall, Korea spends 2.6% of GDP in higher education.
In terms of the percentage, Korea ranks the second in OECD countries after the
U.S. and Canada, which spends 2.8% and 2.7% of GDP in higher education,
respectively (see Table 6.3). Out of 2.6%, only 0.7% is spent by the government, and
the remaining 1.9% (73% of the total spending on higher education) is borne by the
private household. In terms of the share of the private funding, Korea ranks the first
in OECD, followed by Chile and the U.S.
Most of the private funding takes the form of tuition fees charged to students.
Most of public universities in Korea charge significant amount of tuition fees. In
the academic year 2012, national universities charge $4,000–$5,000 and private
universities charge $6,000–$9,000 for the full time study of one year. The level of
tuition for the Teachers Universities is about one half of the national universities.

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 Public-Private Mix of Higher Education in South Korea

Table 6.3. Spending on tertiary education as % of GDP in OECD

countries, 2010

Public Private Total

Australia 0.8 0.9 1.6

Austria 1.5 0.1 1.5
Belgium 1.4 0.1 1.4
Canada 1.5 1.2 2.7
Chile 0.7 1.7 2.4
Czech Republic 1.0 0.2 1.2
Denmark 1.8 0.1 1.9
Estonia 1.3 0.3 1.6
Finland 1.9 0.1 1.9
France 1.3 0.2 1.5
Iceland 1.1 0.1 1.2
Ireland 1.3 0.3 1.6
Israel 1.0 0.7 1.7
Italy 0.8 0.2 1.0
Japan 0.5 1.0 1.5
Korea 0.7 1.9 2.6
Mexico 1.0 0.4 1.3
Netherlands 1.3 0.5 1.7
New Zealand 1.0 0.5 1.6
Norway 1.6 0.1 1.7
Poland 1.0 0.4 1.5
Portugal 1.0 0.4 1.5
Slovak Republic 0.7 0.3 0.9
Slovenia 1.1 0.2 1.3
Spain 1.0 0.3 1.3
Sweden 1.6 0.2 1.8
United Kingdom 0.7 0.6 1.4
United States 1.0 1.8 2.8
OECD average 1.1 0.5 1.7

Numbers do not always add due to rounding

Source: OECD, Education at a Glance (2012)

113
S. Kim

Some public institutions charge even less tuition. For example, KAIST (Korea
Advanced Instituted of Science and Technology) that was established by the
Ministry of Science and Technology (MOST) in order to supply high level science
and technology manpower charges less than $1,000 for undergraduates. Virtually all
graduate students enrolled in KAIST are some kind of scholarship or assistantship.
The level of tuition varies across the field of study. In general, medical schools
charge the highest tuition, and humanities charge the lowest. The universities with
greater reputation and higher ranking typically charge higher tuitions. However,
those schools attract more private donations and research funds from government
and corporations. Therefore, the level of student support (e.g., scholarships) is
higher in those universities.
The reliance on tuition revenue is even higher for junior colleges. Since these
are the institutions that are more teaching-oriented and less established in terms of
their reputation and alum base, the amount of private gifts is much smaller than
universities as well. Also, as the Korean government funding to private universities
is mainly for research activities, these type of institutions are not likely to be able
obtain any competitive research grants operated by the government. It is estimated
that more than 90% of these institutions’ operating expenses are from students.
This heavy reliance on private funding sharply contrasts with substantial subsidy
by federal, state, and local governments to community and technical colleges in the
U.S. Therefore, it would be safe to say that Korean junior colleges require relatively
higher user fees.
Such high reliance on private funding in junior colleges in Korea inevitably
makes the institutions as a second class. Even though their tuition is lower than those
of universities, the quality of instruction is much lower than the latter sub-system.
It does not function as a technical school because of its lower financial base, nor as
a low-cost feeder school for the university system. In the U.S. heavy government
subsidy along with cheap tuition make the community college system as a viable
feeder system for low income households who often have full time jobs and are
forced to stay near home. In Korea, the junior college system does not necessarily
cater low income households living nearby. Mostly, they are full-time students
whose academic credential is not strong enough to advance to universities.

3. HISTORICAL DEVELOPMENT OF PUBLIC-PRIVATE MIX

OF HIGHER EDUCATION

Although Sungkyunkwan University5 claims its root to Sungkyunkwan, a higher

learning institution that educated Confucian scholars established during the Yi
Dynasty in 1398, modern-style colleges and universities in Korea can be traced
back to the end of the nineteenth century. During the final years of Yi dynasty,
the West started to influence the development of the modern education system
in Korea. At that time, several Christian missionaries started to establish modern
learning institutions in Korea. An American Methodist missionary, Rev. Henry

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Appenzeller started teaching English in Korea in 1885. His effort was recognized by
the King Kojong in 1886, and he bestowed the name Paichai School, which means
nurturing the talent. The school survived until now, and it exists as a university
and a high school Another American Missionary Mrs. Scranton established a girl’s
school in 1886, and the King gave the name Ewha School, which is the precedent
of the current Ewha Womans University. In 1885, an American missionary Horace
Allen, who worked as a doctor for the King, established a medical school, named
Kwanghyeowon. It was incorporated into the Severance Medical School in 1893.
The Medical School was merged with Chosun Christian College established in 1915
by American missionary Rev. Horace G. Underwood to form Yonsei University. In
1897, an American Missionary Baird established Soongsil School in Pyongyang. It
was closed during the Japanese colonial period to protest the forced worship of the
Emperor, but reopened in Seoul after the Korean War, and later became Soongsil
University. In addition to the Christian missionaries, progressive Koreans established
private learning institutions as well. For example, Bosung School established in
1905 by an aristocrat Yong-Ik Lee has developed into Korea University later. Also,
Buddhist monks established a higher learning institution in 1906, and it became
Dongguk University. A teaching institution for girls established by the Court in 1906
later became Sookmyung Women’s University.
The burgeoning system of modern education in the late Yi Dynasty was
substantially disturbed by the encroachment and annexation by the Imperial Japan.
When Korea was colonized by the Japanese, the Japanese government viewed
education, particularly higher education, as a breeding ground for Korean nationalism
and the independence movement. Consequently the colonial government actively
suppressed the higher education in Korea, and the university education had been
restricted only for limited elite.6 In any case, in 1924, the Japanese government
established Kyungsung (Keijo) Imperial University in Seoul in order to train
government officials and professionals such as judges and doctors.7 The University
was modeled after Japanese Imperial universities such as Tokyo and Kyoto Imperial
Universities that were established during the Meiji period in order to train competent
government officials for the modernization effort.
Although the establishment of private universities has been discouraged, several
private learning institutions of various purpose and programs have been established
during the colonial period. These institutions were converted to universities after
the independence of Korea. For example, Chung-Ang University started as a school
to train Christian nursery teachers in late 1910s. Hanyang University started as a
technical school that train civil and mining engineers in late 1930s.
The liberation from the Japanese colonialism in 1945 and subsequent independence
as the Republic of Korea (South Korea) gave birth of many universities. The number
of higher learning institutions has increased from 19 in 1945 to 55 in 1950. The
bonanza of new universities is due to several factors. First, in 1946, the Kyungsung
Imperial University was reorganized to Seoul National University (SNU) with
the annexation of several professional technical schools following the model of

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American state university. It was the first comprehensive modern Korean university
that had undergraduate and graduate degree programs ranging from engineering to
medicine, from physics to English literature. Second, several private higher learning
institutions were reorganized into American style universities. Many of those schools
were not called universities during the Japanese rule, as the Japanese government
has maintained the very elite-oriented university system. Without the strict rules
by the government and limited space for students in SNU, the suppressed demand
for higher education was met by mushrooming private universities. Third, the land
reform implemented in 1949 exempted the land used for educational purposes,
and several large land owners found it beneficial to donate the land to education
institutions or establish a school by themselves.8
The Korean War (1950–1953) stopped the growth of the higher education sector.
However, the War provided an important catalyst to the development of national
university system. The invasion of North Korea forced the most universities located
in Seoul to seek refuge in the southern provinces. During the War, several universities
conducted classes in provincial cities, such as Busan and Kwangju, sometimes
as a consortium of several universities. While the effectiveness of this temporary
teaching arrangement and the quality of their instruction may be questionable, the
War created the feasibility and desirability of higher education institutions outside
of the capital city. This experience has become the basis for the national university
system in Korea. Between 1953 and 1955, at least one national university was
established in each of the eight provinces of Korea.
The higher education system expanded very rapidly under the Rhee Syngman
government who was an ardent advocate of education.9 However, as the government
was focusing its financial resources to primary education sector. The universal
primary education was on the top of the national agenda. The Rhee Syngman
Administration of South Korea announced the ambitious universal and free primary
school education in June 1st, 1950. The government tried to cope with the rising
demand with very little public resources. Although, domestic resources that can be
mobilized from the damaged economy were not very much, substantial efforts had
been devoted to education. In 1954, the budget for the Ministry of Education was
4.2% of the government’s budget. The proportion has increased to 15.2% in 1960.
Although there were substantial foreign aid to the government, particularly from
the U.S., not much of the resources are diverted to education sector. The biggest
exception was the construction of new school building supported by the American
aid. (McGinn et al., 1980)
National universities were subsidized by the government, and per student
subsidy to a university student is much greater than that to a primary school student.
Therefore, limited fiscal resources prevented the government from increasing the
enrolment in public universities, and the increased demand for higher education was
fulfilled mostly by private universities.10 The private universities are owned and
operated by non-profit corporations governed by boards of trustees, but many private
universities, particularly the newly established ones, are under the strong control of

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the founder or his/her family.11 Though all private universities are de jure non-profit
organizations, many operated with substantial profit motives. Consequently, there
were many incidences involving inappropriate practices of funneling school fund
into the de facto proprietors.
Such laissez faire approach to higher education during the Rhee administration
changed drastically with the emergence of Park administration. The Park’s
government that obtained the power through a bloodless military coup d’état in
1961, committed to rid of corruption that had been widespread during the Rhee
administration. To that end, it strengthened the regulations regarding the administration
of private universities. Enrolment quota was established for each university, and
the requirement for educational inputs such as the quantity and quality of faculty,
physical facility, and so on was strengthened. Appointment of professors was strictly
controlled. Ministry of education instituted a strong control over the establishment
or expansion of universities including private universities. In this environment of
strict control and unmet excess demand, it is natural that universities are engaged
in rent seeking behavior, particularly in regards to the expansion of their enrolment
quotas. Also, as the quota was restricted to the departmental level there was wide
variation of the discrepancy between the market demand and the supply set by the
government among different disciplines. During the seventies, Park’s government
tried to accommodate the increasing demand for higher education into 2-year
technical colleges and the National Air and Correspondence school established in
1972.
The priority for the Park administration’s education sector was not on higher
education, but on primary and secondary education. The success of the universal
primary schooling by the earlier Rhee administration produced a large number of
primary school graduates and rising demand for secondary education. At the same
time, because of the successful push for industrialization and rapidly expanding
exports in light manufacturing industries, demand for secondary school graduates,
particularly in technical fields, grew rapidly. The dictatorial regime of Park’s
government implemented the secondary school equalization policy that eliminated
the competitive entrance examinations and began to subsidize all private school
expenditure so that private schools pay exactly same salary as what public schools
pay. Although the primary goal of the secondary school equalization policy to reduce
the competition to enter better schools and the extent of private tutoring activities, the
policy was enormously effective in expanding the access to secondary schools. With
the fiscal guarantee, the supply of private secondary schools increased.12 Without
competitive secondary school examinations, more primary school graduates are able
to advance secondary schools. In the mid-1980s, the enrolment rate for high schools
became close to 95%.
In addition to the increasing enrolment rate in high schools, the size of the
age cohort for the traditional college attendance increased dramatically. As seen
in Figure 6.1, the number of 20-year old in 1970 was under 500,000, but the age
cohort increased to more than 900,000 in 1980. This ballooning population of the

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S. Kim

Figure 6.1. Number of 20 year olds (1960–2010 Actual, 2010–2060 Estimated)

college age was the direct result of post war baby boom. The combination of the
rapid increase in college age population and the high school enrolment rate gave
tremendous pressure for the demand for higher education.
However, Park’s government has maintained very strict quota for enrolment.
Each higher education institutions are required to obtain the government’s
approval for each department enrolment. However such restrictive policy toward
higher education gave away to massive expansion with two major policy changes.
First, in 1980, the succeeding Chun Administration announced a radical education
reform package. In an attempt to relieve the entrance examination pressure due
to excess demand for higher education, the government increased the enrolment
quota of the higher education institutions. Second, the Chun administration also
adopted so called “graduation quota” in lieu of “admission quota” in 1980. The
justification of the change was the concern on the quality of higher education. It
has been pointed out that university students did not work hard as soon as they got
into the university, while they had to spend a great deal of time, effort, and financial
resources in private tutoring as well as in regular schooling in order to enter the
university. Chun’s government increased the admission quota with the condition
that the university has to drop certain portion of students before graduation
criteria. The “graduation quota” was enormously unpopular to professors and
university administrators as well as to students. It was politically impossible that
the government could enforce the graduation quota, and the policy was rescinded
a few years late resulting in effective increase in the admission quota (Adams,
1993).

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Figure 6.2. Enrolment in higher education institutions, 1965–2012

In 1995, another big shift in the policy on higher education happened during
the Kim Young-Sam administration, when the government adopted deregulation
as a major policy objective. Enrolment quota was eliminated except universities
in Seoul metropolitan area. This policy shift enabled many private universities
located outside of Seoul metropolitan area to increase their enrolment, as the
increased enrolment directly translated into more revenue. The deregulation created
a wave of new universities including the branch campuses of the universities in
Seoul.13 Also, many small private universities are established in regions outside
of Seoul area. The two policy changes (increased quota in the early 1980s and
the deregulation in the mid-1990s) led the Korean higher education system to
massification.
Since the democratization of the Korea’s political system in 1987, the nature of
policy making has changed substantially. During the dictatorial regime of Park and
Chun administration between 1960 and 1987, the government has handled social
policy with strong regulations without much consultation with the public. However,
after the democratization, pluralistic viewpoints through more active public
participation had to be considered in the policy-making process. On the one hand,
the new process may enhance the effectiveness of the policy by enabling the various
stakeholders to be able to express their preferences. On the other hand, the process
may be prone to political deal-making and interest group politics. Therefore, the
policy outcome may over-represent the interest of politically more active and
powerful interest groups.

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4. EFFECTIVENESS, EFFICIENCY, AND EQUITY OF KOREAN

HIGHER EDUCATION SYSTEM

The most significant positive consequence of the substantial private sector

participation from the early stage of higher education development (in terms of both
financing and supply of higher education) in Korea is the successful transformation
to a massified system of diverse institutions from a small, mostly elite-oriented
system. If the country had maintained the elite-oriented system that was inherited
from the Japanese colonial period, the expansion of higher education system would
have been impossible. The large government fiscal requirement to higher education
would slow down the expansion of primary and secondary education as well as the
higher education sector. The choice for primary education at the expense of higher
education by the Rhee government was one of the key ingredients of the expansion of
primary education during the 1950s and 1960s. Similarly, the priority on secondary
education was the key policy choice during the 1970s.
However, such a rapid expansion of higher education reduced the average
input per student. During the 1960s, under the more elitist higher education
system, relatively more public resources are devoted to higher education. But,
the massification of higher education and the continuous increase of government
resources into primary and secondary education reverse the situation. With high
reliance on private funding, the amount of resources devoted higher education
in Korea is comparatively low. Korea spends about 33% of GDP per capita per
university student compared to the OECD average of 43%.
Table 6.4 shows per student expenditure spent in higher education and
secondary education. Relatively speaking, Korea’s per student expenditure
on secondary education is quite high. The figure does not include substantial
expenditure on private tutoring. The amount of private tutoring is estimated about
60–70% of government expenditure. Therefore, if you include the private tutoring

Table 6.4. Per student expenditure in tertiary and secondary education in

selected countries (2004)

Per student expenditure (in US$, ppp*) A/GDP per capita

Tertiary edu.(A) Secondary edu. in %

Japan 11,716 6,952 43

U.K. 11,822 6,505 41
U.S. 20,545 9,098 57
Korea 6,047 5,882 33
OECD mean 10,655 7,002 43

* ppp: purchasing power parity

Source: Internal Government Document

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expenditure, Korea’s spending per student in secondary school exceeds that of the
U.S. in purchasing power parity. However, the per student expenditure on tertiary
education in Korea is almost the same as that on secondary education, while the
figure is about twice as much in Japan, U.K., and the U.S. Although the increase
in educational input does not necessarily convert into the increase in education
output, the absolute and relative low input of Korean higher education should be
of serious concern.
Although the government has increased its spending on higher education quite
substantially over the last decade, the spending gap has not been closed to more
advanced OECD countries. However, it becomes politically difficult to increase the
tuition fees in Korea, even though, as was mentioned earlier, Korean HEIs relies
primarily on tuition fees for their revenue source. For example, the current President
and the Mayor of the City of Seoul was elected on the platform that the tuition fee
for the universities will be cut to one half. The Mayor was able to deliver his promise
for Seoul University (the city university of Seoul), but the President obviously could
not deliver such promise to the whole system.
The trend of lowering input to higher education has been exacerbated since
the democratization in 1989. More democratic and pluralistic political system
legalized the formation of teachers union of primary and secondary teachers. In
1975, the number of students per full-time academic staff in universities was 24
and 23 in junior colleges (see Table 6.5). The student-faculty ratios have increased
dramatically for the last two decades. In particular, the second-tier system in higher
education (junior college system) that is dominated by private sector exhibited a
rather dramatic increase. In 2005, the student-faculty ratio in the junior college
system is over 70! The rising faculty ratio in high education system sharply contrasts
with steadily decreasing student faculty ratios in primary and secondary schools.
While the decreasing fertility rate in Korea has been a sharp decline in the number
of school children, the number of teachers has not decreased with the corresponding
rate.
The rise in faculty student ratio in higher education is striking compared with
the declining ratio in primary and secondary schools. In 1965, the ratio was 62
in elementary schools, 40 in middle schools, and 32 in high schools. In 2005, it
has decreased to 29, 19, and 16, respectively. In fact, the student faculty ratio in
universities is more than twice that in high schools. In junior colleges, the ratio is
more than five times of the high schools!
There are several reasons to explain the contrasting trends in faculty student ratio
between higher education and primary and secondary schools. First, there has been a
sharp decline of fertility rates since 1970.14 Consequently, the of students in primary
schools started to decrease since 1980, while the number of students enrolled in
higher education started very rapidly since then. Second, higher education system
relies heavily on private funding while primary and secondary schools depends
mostly on public funding. The emergence of strong teachers union in the late 1980s
prevented the government reducing expenditure in this sector.

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Table 6.5. Student-faculty ratio

Elementary Middle School High School 4-year 2-year Junior

School University College

1945 69.3 – 25.9

1952 66.5 37.4 27.3
1556 61.2 44.8 38.1 32
1960 58.6 40.7 27.2 27
1965 62.4 39.4 30.2 22 26.0
1970 56.9 42.3 29.8 22 20.5
1975 51.8 43.2 31.4 24 22.9
1980 47.5 41.2 33.9 28 30.1
1985 38.3 40.0 31.6 46 45.1
1990 35.6 25.4 24.6 46 52.7
1995 28.2 24.8 21.8 35 67.6
2000 28.7 20.1 19.9 40 78.0
2005 25.1 19.4 15.1 38 70.9
2010 18.7 18.2 15.5 36.2 61.2

Source: KMOE, Education Statistics Yearbook, various years

The student-faculty ratio of universities started to improve since 1990 and that of
junior colleges started since 2000. At the same time, the quality of the academic staff
has increased over time. In 1970, only 1,440 out of 7,944 full-time academic staff
(18.1%) in universities have Ph.D.’s. In 2000, the ratio of Ph.D. holders increased to
82% (see Table 6.6). There are several reasons for this improvement in the quality
of faculty. First, the supply of foreign Ph.D.s returning to Korea has increased
drastically in the 1980s. Second, the supply domestic Ph.D.’s has rose dramatically
in Korea since 1990. Third, since 1995 the competition among universities makes
them to hire better-qualified professors.
The numbers in the student faculty ratio do not include part-time lecturers.15
In fact, according to the government’s statistics, there are about 85,000 part-time
lecturers teaching courses in undergraduate and graduate programs in universities
and junior colleges. 80% of these part-time lecturers do not hold any other jobs,
and many teach in two or more universities. It is estimated that the current body
count who teaches more than 9 credit hours per week is more than 60,000. For
most of them, teaching at universities is their primary occupation. Most of these
part-time lecturers have Ph.D.’s, but their wage level is quite low. In 2010, their
wage is about $40–80 per hour. If they teach 12 credit hours, their average monthly
earning will be around $3,000 per month. Besides the low wages, they do not have

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Table 6.6. Key statistics on universities teaching staff and Korean doctoral degree holders

awarded in the U.S.

Full Time Staff with

Part time Lecturers

Earned Doctorates

Earned Doctorates
awarded in Korea

Ph.D.’s registered

registered at KRF
Teaching Staff

Total Foreign

U.S. Ph.D.’s
Doctorate
Full Time

at KRF
Year

1970 7,944 1,440 n.a. 407 n.a. 81 42

1975 10,242 2,807 n.a. 994 190 164 104
1980 14,696 4,835 n.a. 528 158 238 114
1985 26,459 9,090 n.a. 1,400 392 413 263
1990 33,340 16,055 21,943 2,747 1,259 1,119 788
1995 45,087 26,771 29,240 4,429 1,306 1,659 1,101
2000 41,943 34,666 46,378 6,555 1,048 1,548 759
2005 49,200 41,397 58,315 8,909 1,545 1,127 529
2010 55,972 47,004 66,289 10,542 1,443 976 725

Source: KMOE, Education Statistics Yearbook, various years

US NSF, Survey of Earned Doctorates, various years

any job security. The teaching contract is typically by the semester. Recently, some
universities started to offer fringe benefits (e.g., national health insurance) to the
part-time lecturers, but there is very little employment protection for these lecturers.
They cover about more than 50% of lower class undergraduate courses, and 30% of
upper class undergraduate and graduate courses. The coverage by part-time lecturers
in lower class undergraduate courses tends to be higher in public universities, as they
tend to be larger classes.
The prevalent use of the part-time lecturers is a response of two market
fundamentals: supply and demand. In one hand, the supply of Ph.D.s in Korea has
been increasing in a remarkable pace. The number of Ph.D.s awarded in Korea
in 1970 was only about 400. In 2010, the number of Ph.D.’s awarded in Korea
increased to than 10,542. In particular, the growth of the number of Ph.D.’s awarded
since 1990 is rather remarkable. In addition to the domestic Ph.D.’s, many Korean
obtain Ph.D.’s abroad. For example, about 1,500 Koreans received Ph.D.’s in the
U.S. institutions every year. In fact, Korea ranks the second (only behind China) in
terms of the number of Ph.D.’s awarded to foreign nationals. In addition to the U.S.,
many Korean receive Ph.D.’s in Europe, Japan, China, and so on. Although there is
no comprehensive data, the number of foreign Ph.D.’s awarded in those countries

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is estimated more than 1,000 per year, because the percentage of foreign Ph.D.’s
registered at the Korean Research Foundation (KRF) indicates that less than 50% of
foreign Ph.D.’s registered at KRF received their degrees Therefore, the annual flow
of the global supply of Korean Ph.D.’s is more than 13,000 per year. Compared to
the total number of full-time academic staff in universities is only about 55,000 in
2010, the job market for Ph.D.’s is bounded to be very tight.
In demand side, the number of professorial positions has not increased as fast as
the number of students. There are many reasons for this relative slow growth. First,
Korean professors have enjoyed significant job security. When hired as a full-time
professorial staff, the reappointment and promotion have been almost automatic.
Although the evaluation procedure for reappointment was established in the 1970s
in many institutions, it has been used for more widely to suppress political dissidents
rather than to professional quality evaluation. At the same time, the age of mandatory
retirement of 65 is relatively older compared to the ones in private sector that ranges
between 55 and 60. Second, although there has been significant competition for better
professors in the entry-level position, the lateral movement of professors has been
very limited. Most universities used tenure-based salary system rather than merit-
based system. The salary is determined more or less by the number of years served
rather than job performances. The lack of market for non-entry level professors created
non-market competition with the professorial ranks, such as coalition formation and
inbreeding. Many universities give substantial preference to their graduates, and often
there was a clear divide between the graduates and non-graduates. In most cases,
the graduates group exerts a stronger political clout by dominating administrative
positions. Third, as the salary of professors takes the major portions of the operational
cost of universities, institutions (particularly private universities) have strong
incentive to economize the use of professors. While the government mandates the
standard faculty size, traditionally such regulations have not been enforced strictly.
Consequently, almost all schools have smaller than legally mandated sizes.
The high out-of-pocket cost to attend universities and the perceived low quality
education received by students encouraged many Korean students seek educational
opportunities abroad. According to the data by the U.S. Institute of International
Education, there were 819,644 students enrolled in higher education institutions in
the U.S. in the academic year of 2012–13. There were 70,627 Korean students in
the same year representing than 8.6% of all foreign students. Korean ranks the third
among the countries with most students in the U.S. following China with 235,597
and India with 96,754 students. Among them, about one half of them registered
in undergraduate programs, 40% are registered in graduate programs, and the
remaining students are in short term programs such as in intensive English programs.
Compared in the academic year of 1993–94, when about 31,000 Korean students
(6.9% of all foreign students in the U.S.) registered in the U.S. institutions of higher
education, the number of Korean has increased steadily until 2010. Since then, the
number has been declining slightly (see Table 6.7). This pattern is quite contrasting
to the case of China, which has been recording more than 15% of annual increase.

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Table 6.7. Number of Korean students in the U.S., 1993/94–2012/13

Institute of International Education

Year Number of Students % of Total Foreign Number of US Study

from Korea Students in US Abroad Students Going to
Korea

2012/13 70,627 8.6% n.a.

2011/12 72,295 9.5% 2,695
2010/11 73,351 10.1% 2,487
2009/10 72,153 10.4% 2,137
2008/09 75,065 11.2% 2,062
2007/08 69,124 11.1% 1,597
2006/07 62,392 10.7% 1,312
2005/06 59,022 10.4% 1,267
2004/05 53,358 9.4% 941
2003/04 52,484 9.2% 881
2002/03 51,519 8.8% 739
2001/02 49,046 8.4% 631
2000/01 45,685 8.3% 522
1999/00 41,191 8.0% 444
1998/99 39,199 8.0% 479
1997/98 42,890 8.9% 375
1996/97 37,130 8.1% 380
1995/96 36,231 8.0% 411
1994/95 33,599 7.4% 374
1993/94 31,076 6.9% 373

Source: IIE, Open Doors, various years

As in many developing countries, most of the government’s higher education

funding goes directly to public universities in the form of price subsidy. This means
that anyone who goes to public universities get the public subsidy indirectly. In
particular, the top public universities such as Seoul University and KAIST get
more than the proportional share of the government’s budget. Also, other public
universities located outside of Seoul region have price advantages over private
universities located in the same area. As students find the financial advantage of
public universities, admission to the public universities are more competitive.
Students spend substantial amount of resources by taking private tutoring in order to
increase the chances to be admitted. The net result is that the top public universities
(that are heavily subsidized) are dominated by the students from upper and middle

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class. In short, the remainder of elite-oriented public universities favors more

affluent students. When the private sector does not have the ability to operate top
class universities, public spending on the elite public universities may make sense,
because such institutions may have substantial positive externality, such as creating
research output, producing and maintaining national social heritage. However,
in Korean situation, price subsidy tends to favor upper and middle class students
without clearly justifiable public objectives.

5. MARKET COMPETITION AND GOVERNMENT REGULATION

A crucial question in higher education policy is what should be regulated and what
should be left to market competition. Another related question is how and to what
extent the regulations be applied. Virtually all aspects of the operation of higher
education sector are open to government regulations. In some countries, student
selection and school choice are regulated. Faculty recruitment may be regulated.
The level of tuition payment is regulated in some countries. The introduction and
operation of academic programs are also subject to regulation. The entry and exit to
the sector may also be regulated.
Since countries differ in terms of the functional role that the higher education
system plays in the national context, it would be difficult to come up with a solution
that can be applied to all countries. However, the examination of Korean case may
be beneficial in designing the proper mix of government and market in the delivery
of higher education service, as the country’s experience is quite rich both in terms of
market competition and government regulation.
With the substantial private sector participation in higher education, Korean
higher education system is run by an interesting mix of market competition and
government regulation. Despite of heavy dependence of private funding (even
for public universities), the Korean higher education has been regulated by the
government quite extensively. The extent and intensity of regulation has fluctuated
across different governments. Nonetheless, it would be safe to say that still the level
of government regulation is relatively high despite the general trend of deregulation.
However, it is certainly true that the area and the level of regulation has been
changed over time, and applied differently across different aspects of higher
education operation. Over the years, student selection by institutions and school
choice by students are fully allowed. However, the selection procedure and criteria
have been regulated quite extensively by the government and the rules have been
changed quite frequently.
The initial push for heavy regulation started with the military government by Park,
who obtained the power through a coup. The imposition of the heavy government
regulations are driven by two factors. First, one of the government’s major social
policies was the reduction of corruption. The laissez faire attitude of the previous
Rhee administration toward higher education, and subsequent expansion of private
higher education sector created substantial profiteering endeavors. Private education

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became business, although the government nominally prohibited profit making by

private education institutions. Many proprietors of the private education institutions
used the schools as a vehicle for their personal power and wealth. Sometimes, they
and their families and friends were engaged in illegal transfer of funds from the
school to their personal business of household account. Such incidents sometimes
create very public dispute between the proprietors and teachers and students.
The second motivation for the heavy government regulations is based on the idea
of manpower (or human resource) planning. In order to satisfy the labor demand for
the planned rapid industrialization and economic growth, the “right” amount and
composition of graduates were planned, and the government assigned its planned
goals to universities and junior colleges.
Moreover, disputes among the stakeholders in university campus create a room
for the government intervention. The government naturally emerges as an arbitrator
of such dispute, since the dispute typically involves political as well as legal issues.
The political wrangling also creates opportunistic rent-seeking behavior among the
stakeholders. For example, proprietors find it useful to have a government support
when such dispute erupts. Therefore, they create a cordial relationship with the
government regulators by providing jobs to the bureaucrats after their retirement
from civil services, as the connection between the past and present regulators would
create positive affect to the owners. At the same time, students and teachers may use
the political leverage to influence the outcome of the dispute.
Generally speaking, the degree of government regulations has been relaxed over
time. The dictatorial government gave away to more democratic political structure
since 1989. In particular, the 1995 Education Reform during the Kim Young-Sam
administration gave substantial autonomy to individual institutions. For example,
the admission quota of the institution by department was abolished except the
universities that are located within the Seoul Metropolitan area. The exception was
instituted as part of the anti-growth policy of the capital region in order to reduce
heavy concentration of people and economic activities into the region.
Deregulation creates new challenges to the stakeholders. Since the benefit and loss
of the deregulation fall down differently to different stakeholders, the nature and the
process of deregulation is likely to be very political. Because of the political rent-
seeking process, deregulation does not necessarily create more efficient system. For
example, most of public universities now adopt direct election of the president of the
university. Under the more centralized system, the president of a public university was
appointed by the government. Therefore, the ultimate accountability of the president
is to the government. The direct election of the president by (mostly) faculty members
created substantial coalition politics among faculty members. The president, if elected,
needs to reward the coalition, which is not necessarily to the benefit of the university.
Some of the reform measures were not adopted voluntarily due to the interest
of some stakeholders. For example, under the old system, each university had a
fixed number of students for each department. The liberalization of such regulation
would be beneficial to the students. While it was beneficial to the department whose

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major is in demand, some departments that provide not popular major would not
be able to attract students. The adoption of the new measure may jeopardize the
existing faculty line and even the sheer existence of the department. Therefore, such
departments would resist the liberalization measure, sometimes, successfully by
blocking its implementation.
Faculty recruitment has been also subject mostly to market competition.
Government regulation has been limited to the proper verification of the credentials
of the candidate. However, market competition has been focused on mostly on entry-
level recruitment. The lateral movement for mid-career teaching professional has
been very limited. This is a market outcome that resulted from the fact that salary
level for professors is relatively high and the payment scheme is based mostly on
the length of the service (rather than merit). Without lateral movement, there was
no much need for proper internal and external evaluation system. In the faculty
recruitment area, the government was the one that promoted more competition.
In order to reduce the factionalism and in-breeding, the government required that
universities recruit from more diverse academic backgrounds (such as which school
they graduated from) and gender.
Another example that the government pushed for more competition was that
rule regarding student recruitment. Under the Park administration, the government
regulated the number of students that each department is allowed to admit. Such
regulation was motivated by the policy objectives of maintaining the quality of
instruction as well as the proper manpower planning. The use of the rigid quota
created substantial rent-seeking activities because of the rising demand. Institutions
lobbied hard to increase their student quota, and the bureaucrats abused the power for
personal gains. The 1995 education reform virtually eliminated the quota. However,
the embedded interests among stakeholders prevent the intended implementation of
the deregulation. For example, the deregulation created opportunities for popular
academic programs (e.g., health care and business) expand their students. However,
many unpopular programs see the deregulation as a threat because of the low
student demand, and consequently fewer faculty lines. To top school administrators,
the deregulation created too sudden change in environment. In particular, the
democratization of Korean political system since 1989 created the system of the
direct election of university presidents by the faculty members. Therefore, the
elected president could not implement such deregulation measure that may harm a
majority of faculty members who are adversely affected by the deregulation.
Despite its strong government regulations, Korean higher education system allows
open competition for student selection, faculty recruitment, and extramural funding
activities. The tradition of preserving the competition in such key resources has kept
the Korean higher education system relatively market-oriented. Consequently, the
hierarchical nature of the Korean university system naturally emerges out of the
competition.
Figure 6.3 shows the relationship between the annual operating expenditure per
student by three different types of institutions: public universities, private universities

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Figure 6.3. Student admission score and per student expenditure in

Korean higher education institutions

and private junior colleges. The scatter diagram shows a quite strong positive
relationship between the academic strength of entering class and the instructional
expenditure per student in 2005. There are several points that can be conjectured
from this picture. First, it seems quite clear that the three types of institutions
compete against one another in the homogenous environment. In other words, the
institutions that spend more on students typically attract more academically prepared
students independent of the type of institution. In terms of spending per student,
there is not much difference between public universities and public universities
when you control the average admission score of the entering students. However,
there are some exceptions. The highly endowed POSTECH (Pohang Institute of
Science and Technology) spends substantially more on per student base, but the
school is heavily concentrated on graduate education. Second, institutions compete
in the different segment in the hierarchy. In the top one third of the hierarchy, only
universities compete. There are substantial overlap between public universities and
private universities in the region of the hierarchy. In the middle one third of the
hierarchy, private universities compete with private junior colleges. In the bottom
one third, only private junior colleges are competing against one another.

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Figure 6.4 depicts the relationship between the student admission score and net
cost of attending the school per student, which is the tuition revenue minus the
average scholarship distributed to students. Also, by comparing with Figure 6.3,
it is clear that the amount of scholarship is greater for high-ranking universities.
The student on 90 percentile of the admission score receives about $2,000 per year,
whereas the student below 50 percentile gets less than $500. Also, notice that there
is a clear distinction between the public institutions and private institutions, whereas
the private universities and (private) junior colleges seem to be in one group. The
net cost difference between public universities and private universities clearly
reflects that the government subsidy is directed toward public university students
independent of socio-economic status.

Figure 6.4. Student admission score and cost to a student in

Korean higher education institutions

One of the most important differences between public institutions and private
institutions are the way they are funded. While public institutions charge substantial
tuition fees, they are substantially lower than those of private universities, because
the government subsidy. However, the net user cost of education to the student
should not only reflect the tuition fees but any grants or scholarships that are
paid to the student (typically via the school that the student is enrolled). Table 6.8
shows the percentage of students who receive scholarship. In general, virtually
all the students in the Teachers Universities receive scholarship. Also, more than

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three quarters of students enrolled in other types of public universities receive

scholarship. The percentage of students who received scholarships are substantially
lower for the students enrolled in private universities. However, the average
amount of scholarships is higher for private universities (Table 6.9).

Table 6.8. Percentage of students who receive scholarship

Public Private All

Univ. Teach. Indus. Sub-total Univ. Indus. Sub-total
Univ Univ. Univ

2003 72 99 68 73 51 55 51 57
2004 77 104 73 77 54 70 55 61
2005 85 91 71 84 59 73 60 66
2006 84 95 76 83 62 85 63 68

Source: Internal Government Document

Table 6.9. Average amount of scholarship per student (unit: 1,000 Korean won,
1 US $ = 1,000 won)

Public Private All

Univ. Teach. Indus. Sub-total Univ. Indus. Sub-total
Univ Univ. Univ

2003 579 360 300 519 1,124 756 1,101 908

2004 616 402 297 551 1,118 755 1,092 915
2005 692 430 328 621 1,162 935 1,148 976
2006 768 457 136 698 1,184 1,006 1,172 1,026

Source: Internal Government Document

Another important difference between private and public higher education

institutions is the governance structure. Twenty four of 26 public universities are
national universities, while the remaining two are city universities. The national
universities are directly controlled by the Ministry of Education and Human resources
in terms of their funding level, personnel policy, and other rules and regulations
governing the operation of the institution. Besides these national universities,
there are several other institutions founded and supported by the government. For
example, KAIST is founded by the Ministry of Science and Technology (MOST). It
is established by a special law that governs the institution only. Its governing body
has 15 members, out of which only four are appointed by government officials.
There are several other public institutions are that established by other government
agencies for more specific focus. These institutions are typically regulated as private

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universities according to the Private School Law.16 In fact, these institutions are de
jure private institutions, but de facto public.
Private institutions typically have independent governing body. The governing
body has to be a non-profit corporation, but it is allowed to have profit-making
businesses to a limited extent. In many cases, the corporation controls more than one
education institutions spanning from kindergarten to advanced scientific research
facilities. The numbers and composition of the board of trustees vary widely
from school to school depending on its historical legacy. Some corporations are
controlled by the members of the founding family. Others are controlled by business
conglomerates who successfully dominate the board by providing a large amount of
funding.

6. KEY POLICY DEBATES

Education policies have been in the middle of social discourse in Korea for several
decades now. Among them two issues are most directly related to the public-private
mix of higher education. First, the revision of the Private School Law has been a hot
political issue for the last two years. Second, creation of the independent governing
bodies for each national university has been proposed by the government.
The basic status and operation of private universities are stipulated in the Private
Schools Law which governs the establishment and the operation of all private
schools, not only universities but all other kind of private schools. Private schools
can only be established by non-profit corporations, not by individuals. The non-
profit corporation can and do in reality establish multiple educational establishments,
sometime ranging from kindergarten to universities. Along with the schools, the
corporation can own and operate for-profit businesses, but the profits of those
businesses can only be transferred to the affiliated schools.
One of the presidential promises by the Candidate Roh Moo-Hyun was to make
the participation of teachers unions in the governance of private schools. The
rational behind this pledge was that private schools, despite their heavy reliance
on government subsidies and tuition revenues by students, are not responsive to
their stakeholders. In particular, many schools have improper or illegal operations.
In several instances, the controlling board members (typically the founder of the
school or his/her family) operate the school for their benefit of the member rather
than that of the whole school. The teachers and students often protest such perceived
wrongdoings, and the protests became legal, political, and social problems. The Roh
government, who nicknamed themselves as “the participatory government” wanted
to raise the voice of teachers and parents by providing mandatory set of seats in the
board of trustees, as the major teachers union was one of the strongest supporters of
the current President Roh Moo-Hyun.
The formation and the legal recognition of teachers unions was one of the most
important institutional developments during this democratization period. In the
aftermath of civil unrest in 1960 that led to the fall of the dictatorial government

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of Rhee, the primary and secondary school teachers form a union. The union was
quite successful, and within a year, about 40,000 members (50% of teachers)
joined the union. However, Park’s military government dismantled the union in
1961, and made it illegal to form a teachers union. The assassination of Park and
subsequent democratization movement rekindled the organization of teachers.
During the 1980s, civic movements against the dictatorial government happened
extensively in many spectra of the society. In addition to the traditional anti-
dictatorial force of the politicians that are out of power and intellectuals including
university students, workers, religious leaders, and school teachers joined the
movement. In 1986, primary and secondary school teachers announced so called,
the Declaration of Educational Democratization. The Declaration promotes
more participatory democratic governance in private secondary schools in which
corruption and abuse of power by the owners were common. It advocates less
intervention by the government bureaucracy, but asks for more government
financial support. Also, it argues that the objectives of education should be
determined by the teachers and parents rather than the government and owners of
schools.
Despite of overt suppression by the government, thousands of teachers gathered
to establish the National Teachers Union in May 28, 1989. In response to this
apparent illegal activity, the government fired 1,527 schoolteachers, and many of
the leaders were arrested. The continuous union movement during the 1990s resulted
in the rehiring of 1,294 teachers that were fired in 1989 during Kim Young-Sam
government. In 1999, the moderately liberal Kim Dae-Joong government legalized
the teachers union. Since then, the Union is regarded as a legal representative of
its members in negotiating collective bargaining. In return of the legalization, the
Union has not been allowed to participate in political movements or to initiate
strikes. However, in many instances the Union did participate in political movements
and coordinate strikes by using sick leaves of the members. The Union is a major
component of the Korean Confederation of Trade Unions that has been known for
its militant tactics. The strong teachers unions in Korea have been able to force the
government to increase the public expenditure in primary and secondary education
leaving the higher education sector to the private sector funding, because the political
power of academic staff was not comparable to the unions both in terms of the
numbers and organizational skills.
On December 9, 2005, the Korean National Assembly passed a revised law that
stipulates the participation of stakeholders in the Board of Trustees. According to the
revised law, at least a quarter of the board members should be recommended by the
recommendation committee composed of stakeholder including teachers, parents,
and affiliated religious organizations. In order to reduce the effect of the founding
family, not more a quarter the seats in the board can be occupied by the founding
families. Also, more transparency in the operation of the board and the financial
books are emphasized.

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The passing of the revised law created a political storm. The major opposing
party boycotted the normal operation of the National Assembly, and it was paralyzed
until the majority power and the president agreed to revisit the revision. As on May
2007, negotiation is still underway.
The second hot political issue related to the public-private mix of higher education
is the privatization of public universities proposed by the Ministry of Education and
Human Resources. The basic model of the privatization is to create an independent
board for each national university following the Japan’s law that passed in 2003. The
law creates individual board of trustees that is responsible for the operation of the
university. The law also establishes endowments established by the government in
the form of land, building, and other assets. The Korean Ministry of Education has
been holding various focus group meetings, but the general reaction has been quite
negative.
The current governance structure of national universities is highly bureaucratic.
The faculty and administrative staffs are civil servants, and their personnel matters
(appointment, promotion, salary, and so on) are managed by the government. In
most cases, the president is elected by a popular vote by the faculty. Consequently,
their tenure is relatively short (typically 4 years), and they are not able to formulate
or implement any measures of substance. The level of autonomy by individual
university is rather limited. In this environment, it is difficult to expect universities
adopt innovative measures to make their institutions more efficient.
In the political front, Korean public universities are relatively autonomous.
That is to say, students and faculty do have significant freedom in expressing their
opinions without political reprisal. This academic freedom is one of the major fruits
of the democratization of political system since 1987. During the dictatorial regime,
many students and professors were punished because of their expressed opinions.
However, they are strongly bound by bureaucratic control by the government making
them difficult to adopt and innovate. Given the fact that private universities are also
highly regulated, public universities do have the advantage over them, because
of their ability to charge significantly lower tuition than the private counterparts.
Private universities are also subject to government regulation. However, they have
considerably greater freedom in designing curriculum and the personnel matters.
They can pay higher salaries to attract “star” professors. Their curriculum can be
designed and marketed more effectively than public universities in order to take
advantage of market opportunities. The fact that public and private universities
competes one another effectively in Korea suggests that the advantage of public
universities (in funding) is more or less offset by their disadvantage (in operational
flexibility).
While the private universities are heavily concentrated in Seoul metropolitan area,
national universities are scatter across the country. University students are highly
mobile, and Seoul has been the major attraction for young people. Consequently,
there has been a strong demand for higher education in Seoul Area. Most of the major
national universities were established immediately after the Korean War to provide

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the demand for higher education across the country. However, industrialization and
urbanization encouraged the spatial concentration of people and economic activities.
Consequently, the growing demand for higher education has been met by private
universities in Seoul metropolitan area. If the government did not actively prohibit
the expansion of private higher education in the region, the concentration of higher
education would have been greater.
Given the advantage of cheaper tuition levels and stagnant additional demand
for higher education in outside of the Seoul metropolitan area, public universities
have a virtual local monopoly. Besides, the job security of civil service is a premium
for faculty member in public universities. Therefore, many existing stakeholders
view that the privatization of public universities and more competition with
private universities would not be a desirable course of action. Students worry that
privatization may increase tuition. While they would want higher quality education,
the prospects of higher tuition would give at best a lukewarm support for the
privatization plan.
Curiously enough, the recent movement of privatization of national universities is
driven by the Ministry of Education. The model of the University of Tokyo, that set
up an independent governing board (with substantial government financial subsidy),
was adopted. The government promised the same level of financial support from
the government while the independent governing board, neither the government nor
the representation of the stakeholders, will be the top-decision making body of each
institution. The proposal is still under discussion, but not surprisingly virtually all
faculty members of the public universities are against the proposal. Even in the most
promising institution, Seoul National University, the flagship University of Korea,
the opposition was too strong so that the possibility of privatization may be quite
dim.
In this environment, Korean public universities covet operational autonomy
from the government (holding their funding advantage intact), while private
universities desire more funding from the government (holding their operational
flexibility intact). The privatization of public universities offers both challenges and
opportunities. It will provide greater flexibility, but the fear of uncertain funding
creates anxiety. At the same time, the preference over the potential privatization
differs among stakeholders. The units with high market demand such as business
schools, law schools, and engineering in top universities would welcome such
initiative, because the perceived benefit of privatization is greater than the loss.
However, the units with lower market demand find that the privatization may
destroy the vitality of their programs. In a typical university setting, it is likely that
the majority of units belong to the second category. Therefore, public debate or
participatory decision making is likely to create resistance to the idea. In the recent
discussion of privatization, Seoul National University, the faculty has decided to
reject the Ministry of Education’s plan for privatization.
The difficulty of institutional reform in university governance can be illustrated
by the recent KAIST fiasco. KAIST is a public university founded by the Ministry

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of Science and Technology in 1971, not by the Ministry of Education that supervises
most of the national universities and provides funding. In this regard, KAIST is
different from a typical national university. Its aim, from the beginning, was to be a
world class research university that specializes in science and technology. The basic
rationale of establishing the institution was: first, science and technology would be
one of the most important determinants of economic growth in the future; second, the
Ministry of Science and Technology would be the better agency to supervise the new
institution, because it may be free of heavy regulation that other national universities
have to satisfy imposed by the Ministry of Education. Its basic model of operation
is heavy government subsidy toward elite students with the emphasis of graduate
education, particularly Ph.D. In order to attract best students, KAIST charged no
tuition. At the same time, the KAIST hired top-notch faculty, many of whom had
advanced degrees from top research universities in the U.S. with the expectation
of high research productivity and minimal teaching load. In 2004, KAIST hired a
Nobel Laureate in physics, Dr. Robert B. Laughlin from Stanford University as the
President. The goal of hiring Dr. Laughlin who has no prior administrative experience
was to provide credibility to the institution as a world class research university.
The hiring of non-Korean in order to seek the global prominence was reflected by
the national sentiment that foreign experts would be better able to adopt revolutionary
reform to improve the efficiency of the organization, because they not have the
existing ties to the domestic stakeholders that may prevent them to adopt a reform
that may jeopardize their interests. The success of Mr. Gus Hiddink, who led the
Korean soccer team to the quarterfinals of the 2002 World Cup was the inspiration
of the need for such bold recruiting at the executive level.
However, the rosy expectation of Hiddink-like institutional reform at KAIST did
not happen. On the contrary, there was a tremendous backlash against the Laughlin’s
strategy. President Laughlin suggested that in order to become an elite university
(such as M.I.T or Stanford), KAIST should be privatized. For a physicist, his analysis
is rather economic. That is, KAIST model is not sustainable with the market force,
as the government budget allocation would not be enough for KAIST to compete
effectively. KAIST’s emphasis on graduate education, which is expensive to
maintain (money losing business), without compensating tuition revenues generated
by the undergraduate students who are attracted by the prominent faculty members
and the reputation of the institution will not be sustainable. He wanted to have more
diverse undergraduate programs (with substantial tuition fees) which are attractive
to a wide variety of talented undergraduate students, not just techies and nerds who
are willing to pay for the high tuition. In order to attract such tuition-paying students,
KAIST’s undergraduate programs should be responsive to the market demand. In
short, he wanted to privatize KAIST.
The proposal was not well received at all. MOST see the proposal as a renegade.
Faculty did not like the change. Students do not like the tuition hike. There were
no key stakeholders who would be willing to forego such drastic change. In 2007,
KAIST board did not renew the President Laughlin’s contract as there was a

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widespread dissatisfaction against Laughlin’s leadership. A few months earlier, 20

department heads of KAIST submitted a threatening letter saying that they will all
resign if Laughlin did not resign (Zamiska, 2007).
Declining the number of college bound students in recent years is bound to create
a contentious policy debate in near future. Due to the lower demand, many HEIs are
suffering from financial hardship. It seems inevitable that many of such universities
and colleges need to be closed down or merged. In the public system, the proposal
has been mostly been dealt with merge of departments or nearby institutions.
Despite of the political issues natural to the structural adjustment of this sort, the
government has been able to deal with the issue relatively smoothly. In the private
system, however, the alternatives have been more contentious and complicated. The
current Park administration has been pushing for an adjustment process based on
ranking. In this proposal, lower ranking institutions are forced to cut more students,
and continuous staying in the lower ranking may result in the revoke of the license
to operate the institutions.

7. CONCLUSIONS

Historically, Korea’s higher education is heavily dominated by private sector. Unlike

many countries with a tradition of elite national universities, private universities in
Korea competed with public counterparts even in the highest level of hierarchy. The
primary reasons that Korea’s private institutions’ competitiveness stems from the
fact that public institutions charge relatively high level of tuitions. The advantage of
cheaper tuition of public universities has been counter-balanced with bureaucratic
internal governance structure, because private institutions have more flexibility in
their planning and operation.
The prominent role played by the private sector providers has been one of the
major reasons why Korea has been successfully able to expand its educational
capacities. In the early phase of education development, the Korean government
deliberately focused its resources to primary education, while ignoring the demands
for higher level of education. When universal schooling for primary education
was achieved, the government focused its resources to secondary education. The
cascading emphasis of more public resources to higher level of education was not
planned in advance. Rather it is a combination of successive attempts by different
governments to deal with the rising demand for more education at the higher
level due to the continuous economic growth and swelling graduates. Over the
last five decades, Korea had quite different types of government ranging in terms
of political legitimacy (say, from dictatorial to democratic), level of corruption
and competency, major social goals. It is quite curious to observe that even such
different governments all had to accommodate the rising demand in one way or
another. However, the democratization since 1987 made the policy-making process
much more pluralistic and prone to interest group politics. In particular, the unions
of primary and secondary school teachers have been the major power not only

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in education policy-making, but in national politics. The powerful influence of

primary and secondary school teachers union sharply contrasts with the fact that the
influence of university professors has been limited to their own institutions.
The combination of policy inertia and strong teachers union leave the government
fiscal allocation not favorable to the higher education sector. The small amount of
government funding and heavy reliance on student tuition revenue leave high user
costs to students in higher education. Compared to the U.S. system with substantial
private donations by alums and philanthropic donors and European system with
large government subsidy, Korean higher education puts large financial burden to
students. In particular, the students in the second-tier system of junior college system
often pay higher tuition with lower quality education. To ease the financial pressure,
Korean universities rely on part-time adjunct lecturers for more than a third of course
offerings. Their lower pay and bad working conditions have been a political issue
recently. Korea’s relatively expensive (with lower quality) higher education system
gives strong incentives to students seek educational opportunities abroad. Talented
students who can secure graduate assistantships and students from upper and upper
middle classes are more likely to be leave.
In order to increase the efficiency of the system, the current government seeks
to privatize public universities by creating independent governing bodies for each
university. The limited privatization mimics the Japanese experience. But, Korean
government is making the privatization more voluntary, that is, and the results would
be interesting to watch.
Another thorny issue in the public-private mix of higher education in Korea has
been the level of autonomy of private institutions. The corruption and arbitrariness of
the major controllers (typically founding families) in private institutions have been
a political issue for several decades. Many teachers, particularly union members,
view that it is a democratic right that teachers have a voice in school governance. On
the other hand, the foundation that owns the institution argued that they should be
allowed to make the decision on personnel policy and curriculum design without the
political demands by teachers.
The emphasis on efficiency in public universities and on accountability in private
universities made the distinction between public and private universities less clear.
The government’s role in higher education has been evolving in Korea for several
decades. At the same time the search for proper mix of government regulation,
funding, and market competition continues.

NOTES
1
This numbers do not include 11 branch campuses of major private universities whose main campuses
are located in Seoul. These branch campuses are of substantial sizes, and some of them have more than
10,000 full time students.
2
For example, in the 2012 QS ranking, four private universities and two public universities in Korea
are listed in the top 200 universities in the world.

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3
According to OECD, tertiary-type A programs are largely theory-based and designed to provide
sufficient qualifications for entry to advanced research programs and professions with high skill
requirements, such as medicine, dentistry and architecture, and have a minimum of three years of
full-time equivalent at the tertiary level.
4
Tertiary-type B programmes are typically shorter than those of tertiary-type A and focus on practical,
technical or occupational skills for direct entry into the labour market, although some theoretical
foundations may be covered in the respective programmes. They have a minimum duration of two
years full-time equivalent at the tertiary level.
5
This private university is currently owned by Samsung, the largest business conglomerate in Korea.
6
In 1945, there were 19 higher learning institutions, which have less than 8,000 students in total.
7
Kyungsung (Keijo) was the name for Seoul during the Japanese rule..
8
The land reform was an attempt to redistribute the land from large landlords to sharecroppers in order
to increase the crop yield as well as to create a more equitable distribution of land.
9
Rhee himself was highly educated with a Master’s degree from Harvard and a Ph.D. from Princeton.
10
The enrolment increased from 11,358 in 1950 to 101,014 in 1960.
11
Typically the board of trustees has the legal ownership of the institution, the founder or his/her family
is the de facto proprietor, by manipulating and controlling the appointment of the board.
12
In 1965, there were 695 public middle schools and 513 private middle schools in the nation. In 1980,
the number increased to 1,351 and 749 respectively. In 1965, there were 701 public high schools and
385 private high schools. The number increased to 833 for public and to 850 for private in 1990.
13
For example, Yonsei University established a branch campus in Wonju, Korea University in Jochiwon,
Konkuk University in Chungju, and Hanyang University in Ansan.
14
The total fertility rate in 1970 was about 4.5, and it has decreased to about 1.5 in 1985.
15
Therefore, it exaggerates the low faculty input. International comparison need to take this into
consideration.
16
For example, Information and Communication University is established by the Ministry of Information
and Communication. Although it is established by the government, and most of the funding is provided
by the government, it is regulated with the Private School Law. In other words, in legal perspective, it
is a private university.

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 PABLO LANDONI1

7. DIVERSIFICATION AND ISOMORPHISM

New Dynamics in Uruguay’s Higher Education System

1. INTRODUCTION

As higher education in Uruguay moves from a monopoly model with a single public
university to a diversified scenario with multiple institutions, the new dynamics in
the system provide an interesting field to revisit the impact of isomorphic forces
in higher education. The analysis of the intersection of relevant literature on New
Institutionalism, which highlights institutional rationality towards the emulation of
leading organizations, and of the growing bibliography on private higher education,
provides insights to understand how public-private relationships are changing in
higher education.
In order to fulfill this aim, it is important to evaluate how dynamics of diversification
and isomorphism impact on Uruguay’s higher education system. Regulation and
the role of the State have relevant consequences on institutional homogeneity. The
analysis of the organizational structure of the institutions shows that the “Napoleonic”
professional model is being used by all institutions, public and private alike.
Programmatic diversity will be reviewed to collect evidence on diversity in terms of
academic programs and fields of study, since in Uruguay’s higher education system
diversity appears as the driving force for academic programs’ growth. Scarcity of skilled
human resources in the system will be considered to understand the impact of shared
faculty on homogeneity in institutional offerings. The possible isomorphic impacts of
quality assurance mechanisms including accreditation also will be examined.

2. HISTORICAL CONTEXT

For a Century and a half, Uruguay had a sole provider of higher education, the
University of the Republic, a public institution founded in 1836 six years after
independence. The Spanish and Portuguese crowns did not establish colonial
universities in the country as happened in other parts of Latin America.
The University of the Republic was founded as a National university with the
purpose of contributing to the construction of the Nation. From the beginning, ties
between the State and the university were tight. As other national universities in the
region, the organizational structure followed was the Napoleonic model, given that
France provided the inspiration for the newly independent countries.

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The National University’s main function was to grant degrees and professional
licenses, serving the needs of the State for trained graduates in the administrative
and political cadres of the government. Consequently, professional training was
the core of the university’s functions under the Napoleonic model (Oddone & Paris
de Oddone, 1963). The institution was also responsible for providing secondary
education until the beginning of the XX Century. Thus, the University of the
Republic always played a central role in Uruguay’s educational system.
Uruguay is an exception in Latin America because the private sector of the higher
education system was not permitted until the mid 1980’s. The strong influence of
the University of the Republic and the ability of the institution to absorb the added
demand for higher education studies for some time, due to the relatively small
population of the country, were the most important factors explaining the public
monopoly until 1985 (Romero & Landoni, 2001). The late development of the private
sector in Uruguay, compared to other Latin American nations, had consequences on
its regulatory framework and therefore on system configuration.
A first attempt to create a private university in the XIX Century was promoted by
the Catholic Church as a reaction to the secularization of the State and the society.
The new Catholic institution started offering courses in the field of law in the year
1878. The University of the Republic reacted opposing the initiative and a law was
passed in 1885, conceding the monopoly of granting degrees only to the National
public university. Contrastingly, a contemporary effort in Chile was successful with
the foundation of the Catholic University of Chile (1888).
Another movement to create a private university surfaced in the 1960’s, when
a political shift in government gave the occasion for a group of Catholic orders
and priests to promote the creation of a university, based upon a preexistent tertiary
institution. Lack of resources and organization of the promoters together with the
opposition of the public university were the key factors for failure (Monreal, 2005).
Nevertheless, it is interesting to note the coincidence in time of this initiative with
the authorization of the first private (Catholic) university in Argentina (1959).
Finally, the first private university was allowed to function in 1985. During
the last year of the military government, the Ministry of Education authorized the
Catholic University, and the new democratic government confirmed the decision,
consequently starting classes in March, 1985.
As the experience in Latin America shows, the first private universities created
were Catholic (Levy, 1986). This first wave of private impulse was characterized by
the willingness of the Catholic Church to impact public debate and elite formation,
as well as a reaction to the influence of secular ideas.
In the following decade, the Ministry of Education authorized programs to grant
university level degrees based on the “reasonable equivalence” to the programs
offered by the public university. Based on that policy, the Catholic university
diversified and some private institutions operating in the post-secondary level were
allowed to grant university level degrees, resulting in the creation of an incipient
private sector of higher education.

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In 1995, a new regulation was introduced in order to authorize private higher

education institutions (Landoni, 2008). All institutions had to apply for the authorization
of the Ministry of Education including the Catholic University created ten years before.
Since then, four universities and eleven university institutes were authorized.
One of the reasons of private expansion was a reaction to perceived failures in
the public university. In 1980, the military government of the country introduced
entrance exams and quota policies for the National University, halting the number
of enrolments until 1985. After the military government, the institution received
important political pressure to democratize higher education, and consequently new
social groups had the opportunity to access higher education. As a result the public
university doubled enrolments between 1983 and 1988 provoking great tension to
absorb the new demand and lost much of the elite nature it enjoyed decades before.
Massification of the public university was the result of the decision not to create
new public universities. Accordingly, demand shifted to the private side fueling
growth.

3. REGULATORY ENVIRONMENT

The higher education system regulates the public and the private sectors differently.
On the public side, the University of the Republic is the single higher education
institution in the Country and enjoys a legal status of full autonomy. The institution
is supported by public funds, most of them from the national budget since
undergraduate programs are not charged by tuition.
The Ministry of Education is responsible for the oversight of private higher
education institutions through institutional and program authorization. The
Ministry is advised by a Board (CCETP) with representatives from the ministry,
the University of the Republic, private higher education institutions and the public
agency responsible for basic education.
Regulation for private institutions defines strict requirements for authorization,
having a fixed notion of the concept of “university” including the functions of
teaching, research and community services, and focuses on bureaucratic control and
evaluation based on academic inputs like faculty qualifications and infrastructure.
Private institutions can be created only under two types: universities or university
institutes. The distinction is based upon the number of fields of studies in which they
teach and research. Both function at the university level, but institutions can only be
recognized as universities if they perform activities in three or more fields of study.
If the institution only performs academic functions in one or two fields it must be
recognized as a university institute.
There is also a mandatory requirement that private higher education institutions
should be non profit.
The private sector does not receive funding from the State and there are no
publicly financed scholarships and loans for students willing to enroll in private
universities.

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By virtue of these stipulations, the role of the State in higher education

governance has being questioned, since there are no institutionalized arenas for
policy articulation between the National University, the private institutions and the
Ministry of Education (Landoni, 2010).
Nonetheless, the introduction of accreditation mechanisms to higher education
is having impacts on regulation. Due to commitments with countries of the
MERCOSUR area, Uruguay participated in an experimental mechanism of program
accreditation (Landinelli, 2010). As a consequence, the Ministry of Education is
proposing the creation of a National Accreditation Agency as a system-wide
instrument for quality assurance.

4. PRIVATE SECTOR’S GROWTH: INSTITUTIONS, ENROLMENTS

AND GRADUATES

Since 1995, private higher education has changed dramatically in terms of the
number of institutions, enrolments, number of graduates and academic program
development. The private sector moved from a single university in 1995 to
fifteen institutions operating at the university level ten years later. Private share of
enrolments increased up to 21.5% and graduates grew from 2.8% in 1995 to 23.5%
in 2010.
Four universities and eleven university institutes were created between 1995 and
2010. Demands for governmental authorizations of private universities concentrated
in the years 1995–1998; after that year, only university institutes applied for
authorization.

Table 7.1. Evolution of private institutions (1995–2010)

1995 1998 2001 2004 2007 2010

Universities 1 4 4 4 4 4
University institutes 0 2 7 10 11 11
Total 1 6 11 14 15 15

Source: Landoni and Sauksteliskis (2011)

Private institutional diversification contrasts with the public side. Uruguay did
not experience institutional proliferation in the public side of the system as other
countries in Latin America (Cosentino de Cohen, 2003). Nevertheless, there are
attempts of reform with proposals for a Polytechnic and teaching training universities.
The increasing demand for higher education studies observed in the last decades
is having a profound impact on institutions. Until 1980, enrolment expansion was
absorbed by the University of the Republic. After that year, an entrance exam was
established to control demand. Since 1985, the national university has returned to
its traditional open admissions policy, driving enrolments from 27,000 students

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in 1983 to 61,428 in 1988. Massification was absorbed mainly, by the National

University through structural differentiation via the creation of several new schools
and academic programs in the last decade (Bentancur, 2002). The University of the
Republic does not charge tuition to students.
Despite the fact that growth of population in Uruguay is very slow, less than an
annual 1%, demand for higher education is still high. Access to the University of the
Republic increased from 13,052 new students in 1995 to 18,571 in 2005, growing
42% during this decade, since new social groups are accessing higher education,
mainly female students and those coming from outside the capital city, Montevideo.
In the last decade, the private sector absorbed an increasing number of
enrolments, growing from 2,147 students in 1995 to 22,397 in 2010. In 1996–1998,
when new universities were authorized, enrolments soared. However, during the
years 2001–2003, the country endured an important economic crisis; shifting
demand from the private sector to the public university due to the fact the University
of the Republic does not charge tuition. Since 2005, private enrolment growth has
been steady.

Figure 7.1. Percentage of private enrolments, 1995–2010.

Source: Ministry of Education (MEC) Anuario Estadístico de Educación 2010

Private institutions are receiving an increasing share of the total enrolments in

the higher education system. In the 1995–2010 period, private enrolments grew
from 5.6% to 21.5%. But Uruguay is far from Chile, Colombia and Brazil which
enroll more than 50% of the students in the private sector (Levy, 2009).

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Expanding enrolments and deteriorating academic conditions, coupled with

political unrest were important reasons for failure in traditional universities in Latin
America. Even though public universities in Europe and the United States also
suffered these problems, most developed nations adopted structural reforms opening
institutions to societal influences and changing the academic decision-making
processes, avoiding failure of public institutions (Altbach, 2005).
Similarly to other Latin American public institutions, the University of the
Republic, faces today’s challenges with the same Napoleonic organizational
structure created a Century ago. Some schools and areas of study were able to
create adequate teaching, learning and research conditions, but most of the
undergraduate level studies suffer from lack of resources. Internal efficiency of
the institution is very low measured by the graduation rate (ratio of graduates
to enrolments) and the number of years to produce a graduate. The graduation
rate has been recently estimated in 28% of the total number of students entering
the institution (Boado, 2005), and available data confirm drop-outs and repetition
rates are high.
On the other hand, private institutions have better graduation rates. The private
share of this rate increased from 2.8% in 1995 to 23.5% in 2010. Figure 7.2 portrays
the growing share of private graduates entering into the labor force, and, although
private institutions are a recent endeavor in Uruguay, they are having a rising impact
on the number of graduates of the system.

Figure 7.2. Percentage of private graduates, 1995–2010.

Source: Ministry of Education (MEC) Anuario Estadístico de Educación 2010

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5. FORCES OPERATING IN THE SYSTEM: ISOMORPHISM AND

DIVERSIFICATION

Public-private relationships are changing in higher education worldwide (Kim

et al., 2007). Uruguay followed the international trend allowing the existence of
a private sector, shifting from a monopoly situation of a single public university to
a competitive scenario with multiple institutions.
The analysis of isomorphic and diversification forces in shaping public-private
dynamics provides a rationale to understand this new scenario, and for policy
oriented research.
Isomorphism is a constraining force pushing for homogeneity, coming in some
cases from State regulation, or in other contexts by a rather rational institutional
response. Diversification has been highlighted by private higher education literature
as a feature of private sector expansion, but it is not an inevitable outcome of private
development (Texeira & Dill, 2011).
The study of the concept and types of isomorphism sheds some light on how
the higher education system operates in Uruguay. Isomorphism in higher education
has been defined by Van Vught (1996) as constraining process that forces an
organization to resemble other organizations that face the same set of environmental
conditions. Higher education institutions both influence and are influenced by the
environment (Tierney, 2008). Universities as organizations adapt to the existence
and pressures from other organizations in their environment, adopting isomorphic
behavior as part of the conforming process of universities to demands coming from
the outside. This behavior can be an important factor to inhibit growth of a distinctive
private sector because in many cases it leads institutions to homogenization.
A relevant question to understand the development of public-private dynamics in
higher education is to evaluate how institutions respond to pressure and constraints
of the environment. Relevant for this study is to observe under which conditions
higher education institutions decide to innovate and diversify, or in which case they
prefer to emulate leading organizations. The study of isomorphism contributes to
understand similarities and differences in higher education systems (Levy, 2004).
New Institutionalism literature (Powell & Di Miaggio, 1993; Zucker, 1987)
distinguishes three different types of isomorphism: coercive, normative and mimetic.
Isomorphism can be coercive when it is imposed from the outside, usually coming
from the State or from dominant organizations in the system like venerable public
universities working through the State (Levy, 1999).
The University of the Republic is the dominant actor in Uruguay’s higher
education system, and although public monopoly ended more than 25 years ago, the
National University still has a strong voice and sometimes veto powers over the rest
of the system.
Private universities’ regulation in Uruguay enacted in 1995 recognizes an
important influence of the University of the Republic. For example, three of the
eight seats in the Board that oversees the private side of the system are appointed

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by the University of the Republic, and usually the two members representing the
Ministry of Education are actual or former professors from the same university.
The new Education Act passed in 2008 did not alter private sector regulation,
but reinforced the role of the University of the Republic in educational policies in
general, strengthening its power as a key organization in the educational system
(Landoni, 2008).
The main factor for normative isomorphism is professionalism. Professional
organizations socialize dominant norms and values creating a dominant culture that
acts as a restraining force against diversification. In Uruguay as in other developing
countries, some fields of study are almost prohibited for private universities, not
because of State regulations or actions by the public university, but by professional
associations that consider diversity coming from private programs as a threat.
One example of a major force opposing the development of private medical
schools in the country has been the professional organization of physicians.
Discussion leading to the approval of a recent proposal was not based on academic
quality of faculty or the program of studies but on normative isomorphism. The
discussion focused on how different an academic program from a private institution
can be from the Century old course of study of the dominant organization, under
which generations of medical doctors were trained.
Mimetic isomorphism is also a common response of less prestigious universities
that try to emulate more prestigious ones in search of legitimacy. The dynamics
of mimicking are relevant to study in order to understand how private universities
are responding to the new clientele reaching higher education. Legitimacy is very
important for private universities as an asset for competition. Thus this study
will analyze cases of organizations in quest of security using emulation to search
legitimacy from well-established organizations.
As in most countries, Uruguayan private universities hire professors and
administrators from the public pool. The fact that only 8.5% of the faculty in the
University of the Republic enjoys full time positions contributes to private hiring.
The existence of a shared workforce of professors in both sides of the system plays
a part against diversity.
However, impact of mimetic isomorphism in some cases is exaggerated (Levy,
2004). Market dynamics and autonomy shape diverse new goals for institutions.
New actors and forces in higher education introduce different concepts of legitimacy
and quality. Private universities add new norms and values to the higher education
system, including academic standing, but also quick access to labor markets as well
as religious identification, since traditional universities are not the only role models,
but also business or non governmental organizations.
All private higher education institutions authorized by the State in Uruguay,
were created from pre-existing institutions. In some cases, they are still affiliated
with other organizations like religious orders, professional associations, research
institutions and non-governmental organizations, which provide legitimacy and
prestige to the new institution. These organizations provide the private higher

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education institutions with a sense of mission, economic resources, human talent, a

set of goals and policies, together with a strategy for development and a source of
legitimacy that comes not from the field of higher education, but from the association
of the university with a socially recognized institution (Bernasconi, 2004).
Responses to the environment vary: in some cases institutions emulate leading
organization, in others they innovate, despite this, in different situations the
institutions rely on the goals and resources provided by affiliated organizations
including social legitimization. Although environmental conditions that restrict
innovation in Uruguay, private universities proved resilient developing new
institutional and academic proposals.

6. EVIDENCE OF COERCIVE ISOMORPHISM IN THE GOVERNANCE

OF THE HIGHER EDUCATION SYSTEM

Uruguay has a dual system in terms of higher education governance. The State does
not play a relevant role in policy and regulation of the public side of the higher
education system. The law grants an autonomous status to the University of the
Republic. The institution is self-governed by elected representatives of faculty,
students and graduates; therefore, internal constituencies are more relevant for the
authorities of the university than external stakeholders. The State does not appoint
any of the university officials. As a consequence of the autonomic statute of the
university and its tradition of enjoying a monopoly in higher education provision,
the public university operates as a self-contained unit, with authority exercised
by the guilds elevated to the decision-making levels of the institution. The strong
influence of student unions explains the traditional policies of open and free access
without tuition charges for undergraduate programs.
Uruguay has not created a National Accreditation Agency for evaluation and
accreditation yet; however recent proposals to create such an institution can create
conditions to modify this scenario (Landinelli, 2010).
As a result, coordination is very loose, with other sectors and levels of the
educational system, and, therefore, instances for policy formulation are scarce.
Contrastingly, the State is highly involved in the regulation of the private sector.
Private higher education institutions must satisfy strict requirements in terms of
institutional and academic standards to be recognized by the Ministry of Education.
However, State control does not imply public funds for private institutions.
The power of the dominant organization in the system, the University of the
Republic, is reflected in the legal and administrative constraints for the private
sector. They were the result of the negotiation process to allow the opening of a new
private sector in the country.
Thus, the University of the Republic appoints three of the eight members of the
regulatory Board for the private sector, including the Chairman. Moreover, official
opinion from the public university is required to authorize each private institution
and academic program. A consequence of the political conditions under which the

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private sector was tolerated, the University of the Republic has strong veto powers
over the private realm.
Government officials and authorities of the University of the Republic were
aware of the privatization waves in Latin America (Levy, 1986) and decided to give
to the State and especially to the public university a strong role in controlling private
institutions. Legal and policy frameworks were less a response to an unanticipated
sprouting of private institutions like in other parts of the World (Levy, 2002) and
more a controlling device to avoid private proliferation.
The role of the Ministry of Education is an important factor in policy terms.
Historically, it did not have involvement in higher education and only recently has
it been assigned the responsibility of overseeing the private sphere of the system. It
lacks a system perspective and professional expertise in quality assurance, resulting
in the recruitment by the Ministry of Education of officials and staff from the National
university, reinforcing the dominant values and culture from the public university.
State involvement in private higher education authorization constrained
institutional proliferation. It is interesting to compare Uruguay with similar trends in
Argentina and Chile. Agencies responsible for evaluating new proposals of private
institutions were stringent on approvals; for example, CONEAU in Argentina, only
approved 9 of the 83 proposals of new institutions presented in the last decade
(Fernández Lamarra, 2003). In the case of Chile, before the CSE was established in
1990, 40 private universities were created; after that year, the CSE only approved 10
new ones (Lemaitre, 2004).
There is some evidence that agencies sometimes used coercive isomorphism to
limit the ability of institutions to be distinctive in ways the State was not ready
to approve. In Argentina as in Uruguay, the key standard for recognizing private
universities is to have the “proper characteristics of a university” (Fernández
Lamarra, 2004), a problematic quest for private universities that bring diversity
of missions and goals to the higher education systems as private higher education
literature demonstrates (Levy, 2006).
Governmental policies help structure the environment in which institutional
competition takes place (Meek, 1996). The environment in which private institutions
operate is an awkward situation for competition, due to the fact that private
universities enjoy less autonomy than their public counterpart and face the problem
of price differentials. The environmental conditions for private development share
a high degree of homogeneity; therefore it is reasonable to expect lower levels of
diversification in Uruguay’s higher education system (van Vught, 1996).
The strong influence of the public university in the authorization of private
institutions and programs has had relevant isomorphic effects in the development
of the private sector. A first impact is on university governance. The regulation
of private institutions orders that the governing bodies of the institution should
have student and faculty participation, mirroring the Córdoba model of the public
university. As a result, all private institutions created in their legal statues boards
and assemblies with student and faculty representation as a requirement for

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approval, with formal roles but with less substantive impact on decision-making
processes.
Coercive isomorphism is also relevant in terms of institutional autonomy. Despite
the fact the Constitution recognizes the freedom to establish educational institutions;
the State imposes a burden of bureaucratic control on private higher education
institutions. For example, private universities require State authorization for each
campus and academic program they decide to open.
In the Uruguayan case, regulation is strict on academic and administrative
requirements for private institutions approval. The rationality behind regulation
is to limit private sector growth through bureaucratic control. As a consequence,
private universities behave with caution in introducing innovations and substantive
changes in academic programs and institutional developments. The incentive is not
to innovate because if they depart largely from the State University that performs as
the reference model, those proposals are in danger of not being accepted.
As a consequence, the University of the Republic has control over each and
every new development a private institution decides to create. In practice, the
public university has opposed the birth of new campuses of several institutions, and
program development in certain fields of studies such as health sciences and doctoral
programs. The influence of the National university in State control processes
shapes a scenario that constrains diversification of private institutions. Only four
universities have been recognized in the last decade, and they face limitations
in their development due to the restricted institutional autonomy they need to
comply to.

7. ORGANIZATIONAL DIVERSITY AND THE INFLUENCE

OF NORMATIVE ISOMORPHISM:

All private universities are organized in professional schools like the University of
the Republic. Even though, academic departments and interdisciplinary centers exist
in private institutions as well as in the public university, the main organizational
structure is the school (“facultad”).
The weight of the traditional “Napoleonic” model is hefty in Uruguay’s academic
community. The organizational model that the University of the Republic followed
was based on professional schools, starting with Law and Medicine in the XIX
Century, emulated by other professions in the beginning of the XX Century.
The National University, as other public universities in the region, is organized
as a confederation of professional schools. The consequence of this organizational
design is a decentralized structure that reserves strong authority for the schools, lack
of coordination and flexibility among institutional units and a non optimal utilization
of services and resources.
Professionals have a strong voice in this organizational model (Teichler, 2006).
As a result, it is not surprising to see that in the Law that regulates the University of
the Republic, graduates from each school elect their representatives in the governing

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bodies of the institution, including each school and the Executive Board for the
entire university.
The regulation of private universities does not prescribe an organizational model;
therefore institutions had the chance to shift the organizational paradigm and select
a different one. That was actually the case of the Catholic University, where the first
Rector decided not to follow the University of the Republic in organizational terms,
and created several departments. However, the institution faced a dilemma when it
decided to provide academic programs in the field of law. The academic community
in that field of study asked the university to create a school similar to the one in the
University of the Republic. In this case, professionalism was a stronger force than
innovation and organizational diversity was curtailed, thus in a short period of time the
institution reorganized its academic programs into schools. The Catholic University
of Uruguay, despite being established several decades later than other Latin American
counterparts, in organizational terms, decided to be mimetic on most accounts,
asserting distinctiveness in a few areas and in the religious commitment (Levy, 1999).
Clark (1996) argues that the research imperative invariable drives higher education
institutions and systems to differentiate, as the specialization and fragmentation of
knowledge produces an ongoing division of labor. This drift becomes evident in
disciplinary differentiation; nonetheless, it can have limited impact on institutional
differentiation (Meek, 1996). Rhoades (1990) presents a different view, highlighting
the power of academic professionals in defending their own norms and values, and
as a force against differentiation.
The experience of the Uruguayan case shows evidence of how professions were
able to have an impact on the way private universities decided to organize, as all four
private universities have schools in Administration and Engineering and three of
them in Law. Schools of administration include programs in fields like accounting,
human resources, economy and the traditional programs of administration.
An example of the same trend is the recent authorization of an academic program
of Medicine to a university institute. This institute has a long and respected tradition in
social sciences mainly at the graduate level. Coupled with the proposal of developing
the academic program, the institution established a school of medicine. Professional
culture of medical doctors and physicians claimed the existence of a school as the
“proper” way to organize academic activities, but also as a legitimization device for
attracting students.
The influence of normative and mimetic isomorphism decreased distinctiveness
in the organization of private universities. The Uruguayan case confirms Van
Vught’s argument that states the larger the influence of academic norms and values
in a higher education organization, the lower the level of diversity of the higher
education system (1996).
Due to the dominant role the University of the Republic plays in Uruguay’s higher
education system, private institutions tend to adopt a non- risk behavior mimicking
the academic structures of the public university. This is a common response for
private universities in several parts of the World (Teixeira et al., 2001).

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8. PROGRAMMATIC DIVERSITY: MIXED EVIDENCE OF

MIMETIC ISOMORPHISM

Private higher education institutions have shown dynamism on program creation.

Competition for students among universities pushes institutions to diversify,
being the search of market niches the dynamic force behind program development
(Jongbloed, 2003). Academic program development is an example of private
expansion and diversification.
The strategy of private universities to compete with the University of the Republic
includes the offering of innovative programs not available in the public university.
Even though private institutions charge tuition and the University of the Republic
does not at the undergraduate level, the private sector has been able to attract students
in market niches.
The result has been a sharp increase in the number of programs offered by private
institutions. In 1995, the single private university recognized taught ten academic
programs; fifteen years later, 15 institutions teach 144 undergraduate and graduate
programs.

Figure 7.3. Academic program development in the private sector.

Source: Ministry of Education (MEC) Anuario Estadístico de Educación
(http://www.mec.gub.uy)

The impact of program expansion on enrolments has been modest during the
years 2000–2003, due to the economic crisis the country had to endure. However, in
the following decade, the number of enrolled students per program increased steadily.
The strategy of program development and diversification seems to be successful in
attracting an increasing share of higher education students.

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Figure 7.4. Program development and number of students per program.

Source: Ministry of Education (MEC) Anuario Estadístico de Educación
(http://www.mec.gub.uy)

Almost a half of the programs developed by the private sector are programs at
the graduate level, including doctoral, masters and one-year specialization programs.
In 1995, there were no graduate programs offered by the private sector; but in
2009, seventy graduate programs have received governmental approval.
Graduate program development is at the core of private approach for competition.
In the case of professional graduate programs, the University of the Republic
charges tuition, increasing competition in that niche of the market. An example
of private development has been the introduction of MBA’s programs, where the
private sector moved first pushing a reaction from the public university (Landoni,
2005). Nevertheless, the number of public programs with cost recovery is only a
fraction of the total number of graduate programs offered by the University of the
Republic.
The 70 graduate programs offered in 2009 by private institutions had an enrolment
of 3,708 students, 16.6% of the total private enrolment. The private share of the
incoming class of graduate students for the year 2009 was 34%, clearly over the
21.5% of the private share of total enrolments.
An important field of competition in the last years has been the master level’s
programs. Private universities offered only 20 Master level programs in 2001 and
less than a decade later the increased the number of programs to 50. The University
of the Republic has been forced to compete to attract students, developing
organizational structures and strategies different from the traditional practices.

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One example has been the practice of hiring international faculty to increase
quality and attractiveness for the programs. Examples from Argentina and Chile
demonstrate that the master level is the most dynamic part of graduate studies, and
private institutions are key actors competing for that niche (Landoni & Martínez
Sandres, 2011).

Figure 7.5. Number of master and doctoral programs by sector.

Source: Landoni and Martínez Sanders (2011)

Programs at the doctoral level deserve a special analysis. A mix of coercive

isomorphism and lack of resources cause that only one doctoral program has been
authorized to a private university. The University of the Republic opposed several
proposals of doctoral programs presented by private universities, using arguments
based on isomorphism, forcing them to withdraw the requests as a result of the
difficulties encountered in the evaluation process. Alternate private strategies have
been to provide joint programs with foreign universities, without granting a national
degree.
The developments in the field of Doctoral programs contrast with what has
happened at the Masters level, where the private sector has the same number of
programs than the University of the Republic, with the correspondent number of
graduates from these programs.
Most of the academic programs offered by the private sector concentrate in
the Countries’ Capital, Montevideo. Only the Catholic University out of the four
private universities has campuses outside of Montevideo. Two university institutes

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(out of 11) function in a different city than the Countries’ Capital. Ten of the 147
academic programs offered by private institutions are taught outside of Montevideo
and enroll less than 5% of the total number of students in the private sector.
In terms of fields of study, there is a general trend of the private sector worldwide
to concentrate in popular areas with low investment costs (Texeira & Amaral, 2001).
In Uruguay, the most popular field of study in the private sector is administration
with 38.1% of the enrolments. If we include enrolments in social sciences,
humanities and education increase to a 58.5% of the total enrolments of the private
sector. Programs in engineering and technology also enroll a respectable number of
students from the private sector, being computer science the most popular program
in that field of study. On the other hand, enrolments are low in health, agriculture
and natural sciences.
From the comparison of the number of programs and enrolments by fields of
study, it appears that program development has been a successful strategy for
increasing enrolments only in some areas of knowledge, but not, for example,
in the fields of health and law, where the number of students attracted by private
institutions seems modest, especially if compared with the public counterpart.
Some similarities and contrasts between the public university and the private
institutions can be identified in terms of enrolments by field of study. Administration
is popular in both sectors, with 38.1% in the private sector and 17.2% on the public
side (second largest). Important contrasts can be observed in the professional fields
of law and health, with the University of the Republic concentrating almost 40%
of total enrolment in those fields. Private institutions are increasingly focusing on
technological oriented fields where the national university only enrolls 9% of its
students. A surprising figure for the country is the field of agriculture and natural
sciences, with only 13.1% of the enrolments in the public sector and 3.1% in the
private, being the most important area of Uruguay’s economy.

Table 7.2. Percentage of enrolments by field of study, by sector

Administration
and Education
Architecture

Agriculture/

Humanities

Technology
Sciences,
Natural
Science
Health

Arts &

Social
Law

Private 8.2% 3.9% 3.1% 4.3% 20.4% 22.1% 38.1%

Public 25.2 % 8.2% 13.1% 14% 13.3 % 9% 17.2 %

Source: Ministry of Education (MEC) Anuario Estadístico de Educación (2010)

In the Uruguayan case, private differentiation has been propelled by the

development of new academic programs. Private institutions have been very active

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 Diversification and Isomorphism

in program creation to attract new students. They were successful in terms of

enrolments at the graduate level (master’s and one-year specialization programs)
and in some fields of study like administration, social sciences/humanities, and
technology.
The strategy for program development faced limitations in traditional fields like
health (mainly medicine) and law, where the bulk of the enrolments remain in the
public university.
Finally, private institutions did not achieve results in terms of geographical
diversification and the development of doctoral programs. Both cases are an
example of coercive isomorphism, where the venerable public university working
its way through the State (Levy, 2012), introduced strict requirements for approval
that hindered private development.

9. FACULTY: A SUBTLE SOURCE OF MIMETIC ISOMORPHISM

New private higher education institutions, in their search for academic prestige, tend
to hire the best-trained academics from the pre-existing public pool (Levy, 2006).
Uruguay is not an exception to this international trend.
An important factor that contributes to the hiring of faculty members from the
National University by private institutions is the low level of full time faculty in the
public sector. In the University of the Republic, only a 7.5% enjoy a full time status;
54% are part timers and the rest are contracted only by the hours they teach. In the
private sector less than the 10% of faculty members are not hired for the hours they
teach.

Table 7.3. Faculty positions by type of contract and sector

By the hour Part Time Full Time Total

Private 5335 90.9% 329 5.6% 207 3.5% 5871

Public 3699 38.5% 5190 54.0% 720 7.5% 9609

Source: Ministry of Education (MEC) Anuario Estadístico de Educación (2010)

In the case of Uruguay, there is ample evidence of shared public/private faculty

as well as among private institutions. Only one private university asks its faculty
members for exclusivity. Competition to attract faculty is not only an issue among
universities, but also, they have to compete in the professional market where higher
salaries are paid.
It is a rational behavior for faculty members to earn a better salary (and sometimes
to avoid professional work) to teach at public and private universities at the same
time, in systems where full-time positions are rare. In some cases, retiring faculty

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P. Landoni

from the public sector start teaching in private higher education institutions to earn
an extra income.
Quality of education suffers from the small number of full time faculty in the
system, since professors have low interaction with students outside the classroom
and little research is expected from faculty only hired to lecture. In the same way, the
number of faculty members in the National Research System is particularly low in
the private sector, with only 89 professors being accredited as researchers (1.5% of
the total); in the public sector 1,055 faculty members are part of the research system
representing 11% of the total number of faculty members. As a result, it is clear that
Uruguay has a long way to go to professionalize the academia.
The existence of a shared academic workforce is a reason for declining
distinctiveness among institutions. Even though organizational cultures and goals
are different in each institution, faculty members bring a collective culture providing
a shared environment that pulls programs toward mainstream. The environment
structures institutional behaviour (Meek, 1996), and there is ample evidence that
the environment of academia in Uruguay provides a subtle source of mimetic
isomorphism.

10. ACCREDITATION: FOLLOWING INTERNATIONAL TRENDS

Accreditation, in Latin America, has been an instrument of the State to set

policies in higher education. The introduction of quality assurance mechanisms is
a strong innovation for Uruguay’s higher education system, not only because of
the new methodology of quality assessment and evaluation but also because it is
the first time ever a system-wide policy arena is being installed (Landoni, 2010).
Concern in Europe and MERCOSUR alike is on the possible rigid application of
standards and the pressure for harmonization. Even though standards were thought
for different types of universities, international peer evaluators come mainly from
public universities. Therefore, a possible outcome could be to limit the ability of
private institutions (and their programs) to be distinctive in ways the peers and the
accreditation bodies are still not ready to approve (Schwarz & Westerheijden, 2004).
An important step towards quality assurance in higher education systems
in Latin America was the establishment of an accreditation mechanism among
the MERCOSUR countries. Member countries Argentina, Brazil, Paraguay and
Uruguay; and Bolivia, Chile, Colombia and Venezuela as associated members,
decided in 1998 to implement an international accreditation mechanism for
university programs including Agronomy, Engineering, Medicine, Architecture,
Veterinary Sciences, Nursing and Dentistry (Landinelli, 2010). Quality standards
were defined at the regional level, including four dimensions for evaluation:
institutional context, academic project, human resources (including students,
graduates, faculty and administrators) and infrastructure. Procedures include a self-
evaluation report of the program prepared by the university, external peer review
committees with a visit of the institution and a report by the evaluators to the

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accreditation agency. At least two members of the peer review committees come from
a different country of the program being evaluated reflecting one of the purposes of
the mechanism, which is to enhance an international perspective of the evaluation
processes.
The decision made by the national agencies has an international impact, allowing
graduates from accredited programs to pursue academic exchange programs in the
rest of the participating countries.
Since there are asymmetries within the MERCOSUR countries impacts have
been different. Argentina and Chile already had National Accreditation agencies
while Uruguay does not have one yet. The number of the programs participating
in the MERCOSUR processes is a low percentage of programs being offered in
those fields of study in Argentina, Brazil, Chile and Colombia. On the contrary, for
the smaller countries including Bolivia, Paraguay and Uruguay, impact has been
strong, because the MERCOSUR process has been the window of opportunity for
accreditation development in those countries. Consequently, Bolivia and Paraguay
created their own accreditation agencies to participate in the processes for the first
time.
An important feature of accreditation in all countries is that it is designed as a
system-wide mechanism for public and private institutions and programs. Private
institutions first have to be authorized to function by State agencies in order to apply
for accreditation.
A relevant question is presented by Meek (1996) asking if the quality movement
might be a new way of enforcing uniformity under modern conditions. It is not clear
if accreditation is producing homogenization effects due to a rigid application of
standards. Accreditation agencies were aware of that possibility and were careful
to be open in the definition of standards for universities’ missions and objectives.
Nevertheless, there is evidence of normative isomorphism in peer reviewers’
behavior. Evaluators, in some cases, cannot avoid the employment of traditional
values and academic cultures of public universities in the accreditation of private
institutions and programs (Lemaitre, 2009).
As a reaction to the change in the environment, private institutions included
accreditation in their strategy for legitimacy and have been active in applying for
accreditation. In Uruguay, in the case of program accreditation of engineering using
MERCOSUR’s mechanism, the majority of the programs being evaluated came
from the private sector.
Accreditation operates as an external factor influencing higher education
institutions’ environment. Private universities were prompt to react to State policies,
and institutions have considered that participating in accreditation procedures
will have impacts on enrolments, even if there were no financial incentives to
participate. Accreditation produces legitimization effects in private universities and
has impact on markets because it provides information about quality of an institution
or a program. Legitimacy is important for private universities as they bolster their
competitiveness in the higher education (Landoni & Romero, 2006).

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P. Landoni

Since 2006, Uruguay has been discussing several proposals to create a National
Accreditation Agency. It is interesting to notice that private higher education
institutions tend to be more supportive of the initiative than the public university.
Accreditation is expected to have a strong policy impact on the higher education
system, as the future accreditation agency will be the first system-wide arena
ever installed. The University of the Republic accepts accreditation due to the
international context of the mechanism, considering it does not violate their
autonomic status. Contrary to this, private institutions consider accreditation as an
opportunity to legitimize and as an improvement of the current bureaucratic system
of program authorization. Nevertheless, the peculiar architecture of the Uruguayan
higher education system, with a powerful State University unaccustomed to
external regulations, a Ministry of Education without leadership in higher education
policies, and a private sector with little political influence, produced a stalemate
scenario in the creation of an Accreditation Agency for the last two national
governments.

11. SUMMARY OF FINDINGS AND POLICY IMPLICATIONS

The concept and diverse types of isomorphism identified by the New Institutionalism
literature provide a rational explanation to the new public / private dynamics operating
in Uruguay’s higher education system. The opposition of the public university to
the development of the private sector was influential in the regulatory framework
of private institutions, that requires strict standards for institutional and program
approval and strong operational control by the State. Therefore, opportunities for
diversification were less significant in their scope and breath than those in other
systems worldwide (Levy, 2004). Relationships between the State, the public
university and the private realm are being shaped by isomorphic forces.
At the system level, Uruguay regulates public and private sectors differently. The
University of the Republic benefits from a complete autonomy for organizational
and program development without State supervision. Regulation of the private sector
recognizes the dominant position of the public university for policy formulation and
decision-making. Limited institutional autonomy and uniformity of governance
structures of private institutions has been the end result of the adaptive behaviour
of these institutions to conform to environmental conditions of homogeneity (van
Vught, 1996). The Uruguayan higher education system is a case of public dominance,
where private institutions try to avoid veto powers of the public university by opting
for indistinctive growth.
In terms of the structure of higher education institutions, professionalism
provides an organizational paradigm: the professional school under de Napoleonic
model. All four private universities have schools in Administration and Engineering,
and three of them created professional schools in Law. Academic departments are
subordinated to professional schools in all universities and any of the institutions
have comprehensive schools for graduate studies. Organizational differentiation has

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been curtailed by the paradigm of the University of the Republic and the strong
influence of values and norms of professions.
The Uruguayan example presents a mixed case of programmatic diversity
intertwined with normative and mimetic isomorphism forces as a counterbalance.
The clearest evidence of diversification is the trend of innovations in Master level
programs. The private sector is enrolling almost half of the incoming class at that
level of studies forcing the public university to compete. The fact that the University
of the Republic changed its policy in 2001, introducing tuition for professional
graduate programs, enhanced competition at that level of studies and produced new
public-private dynamics.
In the case of professional graduate programs, public/private distinctiveness is
blurring, because programs of the public university mirror privates, not only from
the country, but also from abroad (Levy, 2006).
Doctoral studies have the opposite pattern, where market dynamics are blocked
by coercive isomorphism from the national university, keeping this level of studies
as almost the last realm of public monopoly. Several private attempts to open this
level of studies to competition had difficulties in their approval processes.
Evidence from undergraduate education is more mixed between mimetic
isomorphism and diversification forces. Private higher education institutions
are driven by the goal of efficient placement of graduates into the job market
(Dill et al., 2004). Focusing on fields like administration, social sciences and
education, Uruguay’s private sector is following the international private trend
of concentrating in popular areas with low initial costs. Some private programs
tend to respond to strong demand mimicking public provision (Teixeira et al.,
2001). However, there is counter evidence, like the development of programs in
engineering and technology with higher costs. Attempts to replicate professional
undergraduate programs like medicine and law are having limited impact in attracting
students.
Nevertheless, the dual nature of the higher education system in terms of finance at
the undergraduate level is the main reason why private-public competition remains
limited, because private institutions charging tuition are constrained to attract
students, especially from low and middle income families.
In terms of policy, a main concern for the whole country is the lack of regional
development. Only one private university and two university level institutes have
campuses outside Montevideo. Enrolments outside Montevideo are less than 5% of
the total.
Competition for faculty among institutions is limited in the case of Uruguay,
because only 7.5% of professors in the University of the Republic and 3.5% of those
in private institutions enjoy full time positions. A decade ago, new private institutions
hired professors from the public pool to satisfy requirements for authorization. Since
then, there has been ample evidence of faculty circulation among universities, where
collegial ties are more relevant than institutional identity. Increased circulation of
academics is a factor for mimetic isomorphism, where traditional norms and values

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P. Landoni

of the public university permeated privates, but also private innovations are being
filtered into public programs.
Quality assurance mechanisms are having different impacts on public/private
dynamics. On one hand, authorization processes of private institutions and programs
were put into place to limit proliferation. Public/private divide is sharp in Uruguay
in terms of institutional autonomy, where private institutions endure a rigorous
oversight by the State and the public university enjoys a full autonomous status with
accountability only to internal constituencies.
On the other hand, the recent introduction of MERCOSUR’s accreditation
mechanisms is providing incentives for both, private and public universities
to improve quality to achieve international standards, and to compare quality of
programs with others in and outside the country. Findings show, private institutions
are enthusiastic about the creation of an accreditation agency as a source of
legitimization for a new wave of growth. International experience demonstrate that
quality assurance mechanisms can be an instrument to mitigate public-private divide
in systems with strong public-private distinctiveness in terms of regulation and
finance (Lemaitre, 2009).
Private institutions constitute a relevant part of the higher education system, with
21.5% of the enrolments and 23.5% of graduates in the system. Private impulse is
a driving force for the creation of programs in new areas of knowledge, especially
at the graduate level. Nevertheless, the Uruguayan case is still of public dominance,
with private institutions sometimes innovating towards diversification like in
program development, and in other cases being forced or opting for indistinctive
growth, mimicking more prestigious institutions. The new and distinctive roles the
private sector was expected to bring were only partially fulfilled. Policy should take
into account relevant isomorphic forces operating in the system for further private
development and strengthening of the overall higher education system.

NOTE
1
Parts of this chapter are based on Landoni (2008).

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 PART III
CONCLUSION
 PEDRO TEIXEIRA, SUNWOONG KIM, ZULFIQAR GILANI
AND PABLO LANDONI

8. CHANGING THE PUBLIC-PRIVATE MIX

IN HIGHER EDUCATION
Global Trends and National Challenges

1. INTRODUCTION

Throughout this volume, we have tried to discuss the significance and implications
of the rise of private higher education as a global phenomenon. The rise of this
sector has benefited from the combined effects of financial stringency affecting
governments’ budgets, an increased demand for higher education in many parts of
the world (especially in developing countries), and the change in political and social
attitudes towards private and public ethos in education. In many countries, this has
been a reality that has imposed itself over doctrinaire and philosophical concepts and
disputes, due to the unrelenting pressure of rising enrolments that forced countries
to relax their controls over the provisioning and running of institutions. This created
a fertile environment for the growth of private higher education. Furthermore, the
growing marketisation and privatisation of public sectors have also contributed to
the erosion of social resistance to the private supply of higher education.
Although there has been extensive writing documenting the expansion of
private higher education, much of that work has had a national focus and has
seldom provided an analytical link that could help us understand the phenomenon.
Moreover, much of the existing literature has only recently started to adopt a more
comparative approach that may help us to understand the trends and patterns shared
by private sectors of higher education regionally and globally. This volume has
therefore tried to provide a contribution in that direction by developing a framework
for a better understanding of the public-private mix of higher education and a set
of policy guidelines for dealing with the expansion of private higher education
from a comparative perspective. We started by examining the historical context
of the development of private higher education, regionally and globally, as well
as the major forces that helped to understand how its relevance has changed so
visibly in recent decades. This rapid increase in private higher education has created
many policy challenges, and as in most countries, this was largely unplanned and
unanticipated by governments and regulatory bodies. Thus, we tried to identify the
main policy challenges associated with the contemporary development of private
higher education.

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P. Teixeira et al.

Despite significant changes in higher education as a whole and the rapid

expansion of private higher education, governments continue their role in regulating
the sector. They attempt to determine the main goals of the higher education system,
assure the existence of quality mechanisms, promote fair and equitable access, and
stimulate the efficiency of the system. In recent decades, changes have occurred in the
instruments and mechanisms used by governments to achieve those ends. However,
new policy approaches are required that could address such a diverse and complex
system, which may be beyond the traditional bureaucratic methods. Therefore, we
have proposed a unified and coherent, but flexible, theoretical framework that may
be applied in different countries and diverse systems. The proposed theoretical
framework has three interrelated components, namely the context in which private
higher education has emerged, the dimensions for the analysis of private higher
education, and the functions or missions of private higher education. Additionally, it
is important to be able to evaluate the HES using a set of universal criteria.
This analytical framework constituted the basis for the second part of the volume,
in which we developed case studies of countries from different regions of the world.
The countries analysed were Pakistan, Portugal, South Korea and Uruguay. These
case studies illustrate the diversity of contexts in which private higher education has
flourished in recent decades. However, these chapters also highlight some important
commonalities regarding the role of policy makers in dealing effectively with the
emerging private reality in higher education. Each country may be faced with a
very different set of policy issues. In addition, the socio-economic and political
situations may vary and, therefore, the choices available to policy makers may be
very different. However, there is a set of commonalities in the way that this recent
emergence of private higher education may be approached by policy makers. Thus,
in this final chapter, we try to identify some common issues and trends in the variety
of national experiences related to the development of private higher education.
Based on that analysis, we present some trends that we think will characterise
the forthcoming years regarding the development of private higher education and
the main policy challenges associated with it. In the final part, we present several
general recommendations that may help to build a more effective policy framework
that takes advantage of the private sector in order to better fulfil the missions of
higher education.

2. WHAT CAN WE LEARN FROM THE GLOBAL DYNAMICS OF PRIVATE

HE – COMMON CHALLENGES AND NATIONAL PECULIARITIES

The case studies presented in this volume did not aim to present a comprehensive
overview of private higher education worldwide, but rather, they were intended to
illustrate potential commonalities and trends that may be identified. The case studies
also aimed at pointing out the benefits of developing a common analytical framework
that tries to encapsulate the major issues emerging from the rise of private higher
education. Our aim here is not summarise the case studies, but rather, to point out

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several important themes that were highlighted by them and link this to the first part
of the volume.
One of the first points worth mentioning is that history also matters when
analysing the changing public–private mix in higher education. The relevance of
adopting a long-term perspective to understand the rise of private higher education
has been illustrated in all of the case studies. Several important aspects include
timing in the creation of public and private sectors of higher education, the political
changes and the way these moulded the role of the state in higher education, as
well as the evolution of the international position of each country (and its degree of
integration in political, social, and economic trends). The chapters also indicate that
although private institutions often pre-dated the massification of higher education,
they clearly attained a much greater visibility alongside the process of massification.
A second aspect that seems to be highlighted by the case studies, congruent with the
contextual analysis developed in the earlier part of this volume, refers to the diversity
within private sectors of higher education. All of the case studies mentioned various
issues that indicate that private sectors tend to be very diverse, including religiously-
affiliated and secular institutions, not-for-profit and for-profit institutions, teaching
and vocational colleges, comprehensive and niche institutions, etc. This should be
underlined since in the public debates about private higher education, there is often
the temptation to assume a certain implicit and stereotypical view of this sector,
either characterising it as an unreliable partner in higher education or as an elite type
of institution (modelled from the elite institutions of the private sector in countries
like the U.S.).
A third interesting aspect emerging from the analysis is also how much of
the evolution of the public–private mix is due to institutional adaptation and
transformation. These changes have clearly shaped the private sector, which has been
very much exposed to within sector competition in order to attract fee-paying students
and survive financially. In several countries, this has led to significant examples of
institutional isomorphism, namely by emulating successful strategies adopted by
competitors, which quite often created systemic problems. Transformation in the
private sector also has to do with its efforts to achieve political and social legitimacy,
often by trying to adapt to changes in the regulatory framework. Nonetheless, the
issues of adaptation have also touched upon the public sector, which in several
countries has started to feel increasing competition from the expanding private
sector. Moreover, the regulatory transformations have also meant that their degree
of publicness has eroded (if not in terms of its legal status, at least in the funding
structure and management and governance of public institutions), which has become
less distinctive compared to their private counterparts.
A fourth major issue emerging from the case studies is the extent to which the rise
of private higher education has often become a major regulatory conundrum. The
challenges refer to the fact that the behaviour of the private sector was not always
necessarily according to the expectations of policy makers, namely due to their
geographical and programme specialisations. By concentrating in major urban areas

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and in a few popular scientific areas that posed lower levels of risk and required lower
levels of investments, private institutions have contributed insufficiently either to the
diversification of programme supply from those located in more peripheral regions
or to broadening access to higher education for underrepresented groups.
The regulatory challenges have also been posed by growing conflicts and tensions
about the role of private institutions in the higher education system at large. On
the one hand, private institutions have placed increasing pressure regarding the
possibility of getting access to some type of public support, namely in the areas of
research activities, student support mechanisms, and programmes to promote access
for underrepresented groups. On the other hand, public institutions have not only
claimed a monopoly upon the public mission of higher education, but they have
also placed increasing pressure on policy makers regarding what they considered to
be the visible signs of pedagogic and scientific weaknesses in private institutions.
Thus, governments were forced to justify and rethink the rationales for public
support and intervention in the higher education sector, trying to carve a position
of regulatory independence and effectiveness that was more easily proclaimed in
political documents than what was actually implemented and perceived as such.
Finally, the case studies also highlight the fact that the road ahead for all major
actors has become more complex. This is certainly the case for private institutions
because many of them have seen (or will soon realise) that the context in which
they have flourished has become more adverse. The examples presented in the
case studies of mass systems of higher education in which demand has stabilised
point out that the future of private higher education in a post-massification era will
be more demanding institutionally, financially, and academically. However, the
challenges ahead lie also for public institutions, which have also been affected by
the stabilisation or even decline of student demand, resulting in competitive pressure
from the private sector that is often struggling for survival. Finally, challenges also
exist for policy makers, namely for their capacity to steer the system towards a
greater emphasis on quality and sustainability, minimising the social impact of the
collapse of certain private institutions.
In the following sections, we provide a set of reflections on possible ways to
consolidate the role of private higher education within mass systems and handle an
expanded private sector within a more complex and dynamic policy context.

3. WHAT IS THE FUTURE ROLE FOR PRIVATE HIGHER EDUCATION IN

TIMES OF MASS HIGHER EDUCATION?

Although private higher education has a long historical significance, until recently
its role was rather small in many higher education systems. However, over the last
decades, this situation has changed significantly, mainly due to the massive and
continuous expansion of higher education worldwide. Pressed by increasing financial
constraints and by an increasing cost-burden due to massive expansion of the higher
education sector, governments searched for ways of coping with this paradoxical

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situation, redefining not only their financial role, but also their administrative and
political roles. In many parts of the world, the promotion of private higher education
has emerged as a viable policy alternative to the often over-stretched public sector.
The evidence seems to suggest that private higher education is becoming a
permanent feature of the higher education landscape. As discussed earlier, the
resilience of private higher education is strengthened not only in developing countries
where the limitations in resources prevent governments from major expansions of
their public higher education systems, but also in many developed countries where
fiscal constraints have conflicted with the rising cost of (largely subsidised) public
higher education. Thus, it is important to identify some of the expected major issues
of debate in the coming years regarding the role of the private sector in higher
education.
Arguably, the most important feature of the future perspectives facing private
higher education is that it is likely to become a more necessary part of the higher
education landscape in the coming years. Higher education is expected to persist
as an important priority in policy terms and therefore, the expansion of higher
education is also likely to continue to be significantly pushed, both by social and
by individual behaviour. These expectations pose financial challenges for how to
further expand higher education supply. One of the most likely responses to those
financial challenges will be through strengthening market mechanisms in higher
education, namely by increasing the privateness of the system. This is likely to be a
complex and controversial issue, especially in those countries where the existence of
private institutions remains minimal.
The relevance of private higher education may be strengthened not only due to
the financial constraints, but also as a response to some of the shortcomings of past
massification. In those countries where the patterns of enrolment are still growing
rapidly, expansion of the private sector will tend to focus on the absorption of
unfulfilled demand. However, in the more common post-massification cases, private
institutions may position themselves as a high-quality/high-cost alternative to the
mass/low-cost public higher education. The acceptance of private higher education
may also be enhanced by the changes in the role of the state. The likely strengthening
of a market orientation in higher education, especially in funding, will increasingly
tend to place governments as contractors of higher educational services from
autonomous institutions, which in many cases happen to be publicly owned, rather
than as a provider of public higher education.
Although much of the recent expansion of private higher education has been
characterised as a demand-absorption pattern, in the systems where the private
sector has emerged after consolidation of the massification process, this type of
expansion does not seem to be a very plausible strategy for development. In these
post-massification cases, private institutions would rather cater to market niches and
present alternatives to mass higher education instead of reinforcing it. This more
specialised approach could be expressed in aspects such as the type of programmes
offered or the methods of teaching. Private institutions may position themselves as

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an elite alternative to a mass public system, rather than as a second choice for those
that could not get a place in the latter. While this does not mean that the former
situation will disappear, there are signs that in some countries, different types of
private institutions are emerging, often in order to obtain renewed academic and
political legitimacy.
The consolidation of the private sector and its battle for growing acceptance is
linked to another potential force of differentiation among private higher education
institutions, namely through a stronger commitment to research activities. In most
examples of recent expansion of private higher education, these institutions have
presented a very strong dominance in terms of the teaching mission, and this has
been pointed out as a sign of weakness. However, there is a growing number of
private institutions that are increasingly aware that it undermines their legitimacy.
These institutions have been trying to improve their academic pedigree, for example
through better qualification of their academic staff, an increase in the number
of research centres affiliated with them, and the development of postgraduate
programmes. Although these developments are often still small (and mostly present
in those systems where expansion of the private sector is older and has stabilised its
size), they are an important element to be followed and may become an important
pattern for reconfiguration of the private sector in the future.
The expected growth and relevance of private higher education will strengthen its
quest for stronger legitimacy, which is relevant for emerging private institutions at
several levels. First, it is certainly relevant regarding the teaching mission. Although
many private institutions emerged in contexts of rapid expansion of higher education
demand, they are already facing a more adverse situation in those cases where
demand has tightened due to changes in demographic trends. Thus, they have to
show significant capacity for attraction and the quality of their programmes will
become a greater concern. Second, it is relevant so that private higher education
institutions can be entitled some type of public support for the development of
research activities. Finally, there is the issue of student support mechanisms. Many
private institutions have been lobbying for their students to benefit from mechanisms
of social support, which historically has often been restricted to students enrolled in
public institutions. Overall, this is part of an ambition of many private institutions to
attain a treatment similar to that awarded to most public institutions.
The implications of political and social legitimacy are fundamental for the
capacity of higher education institutions to develop their mission. In many countries,
the level of institutional autonomy is not large and is often below that of their public
counterparts, due to a difficult relationship with public authorities. This frequent
mistrust of public authorities regarding private institutions has often been anchored
in concerns about several controversial features of private higher education
development (geographical and disciplinary distribution, balance between teaching
and research, quality of the degrees provided), which have often been quite different
from political expectations, creating several tensions within the higher education
system. Due to those concerns, governments have been increasingly willing to

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implement evaluation and accreditation mechanisms, often as an instrument to

curtail the proliferation of private institutions.
The question of accreditation is likely to gain additional relevance due to two
major developments that are emerging in the private higher education sector. The
first is increasing visibility of for-profit private higher education institutions, or in
some cases, not-for profit private institutions behaving like for-profit ones. This has
become a major issue of debate in higher education policy in some countries where
a large share of the private providers are nowadays reportedly for-profit (Kinser
& Levy, 2005). Secondly, there is the development of transnational private higher
education. Also on this front, the task of governments will be difficult, balancing,
on the one hand, the need to protect customers in a traditional opaque market such
as higher education and, on the other hand, the potential of those purveyors to
suppress the limitations of national providers. There is some evidence that private
institutions have been rather active in applying for accreditation, since accredited
private institutions are often granted greater autonomy (Kent, 2007). Some
examples, also point out that this process of academic and political legitimisation
through accreditation tends to be more complex in non-university private institutions
(González, 1999; Lemaitre, 2009).
After an initial disconcert, there is a growing recognition that private higher
education will become a more integral part of the reality of mass higher education.
Although the recent privatisation has often been characterised by controversy and
some mismatches between expectations and results, private higher education may
play an important role in mass higher education. This includes major aspects such as
the expansion of higher education to respond to growing demand, the broadening of
access, and the development of some innovative programmes.

4. SOME RECOMMENDATIONS FOR POLICY-MAKING

This strengthening of privatisation and marketisation forces does not mean that
governments will retreat from any kind of regulation. On the contrary, like in
any other market, some kind of regulation is needed, and higher education is no
exception to that (Teixeira et al., 2004). The more governments strengthen the role
of markets and private initiatives in higher education, the more they will need to give
attention to issues such as the quantity and quality of the information available in
the system, the consequences of enhanced institutional competition and the level of
equity (either at the individual or at the institutional level). The challenge for policy
makers will be to learn how to use this rapidly expanding sector in the best possible
manner and to steer it in a way that may contribute to social welfare and fulfil social
expectations regarding the higher education sector. This will only be possible if
governments are able to develop an integrated view of the higher education system,
in which different types of institutions would coexist. This is easier said than done
and will be one of the major future challenges in higher education policy in many
parts of the world. Following, we present some general recommendations that may

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help to build a more effective policy framework that takes advantage of the private
sector in order to better fulfil the missions of higher education.

4.1. Private Higher Education as a Structural and Integral Part of the Higher
Education System

The global expansion of higher education should not be regarded as a temporary

phenomenon, but rather as an irreversible feature in the higher education landscape.
The limitations of public fiscal resources to meet the growing demand will not fade
away, thus the need to use the private sector will not disappear. In some countries,
the growing fiscal demand of an ageing society may further hinder expansion of
public support for higher education. In other countries, the low level of national
income limits the tax base. In any case, it is clear that even the richest countries in the
world are not likely to be prepared, or able, to meet the demand for the massification
of HE. Therefore, in most countries, private HEIs have to have an increasing role
in meeting the HE demand, not only for teaching, but for research and other socio-
political functions of the higher education system in the country.
Private higher education should be regarded as an integral part of the system
in meeting the challenges of higher education. Much of the social functions of
higher education institutions, such as research in the pure science fields, can be
met by private institutions under certain conditions. For example, in the U.S.,
large institutional endowments and competitive government-supported research
programmes allow many private HEIs to effectively deliver a large quantity of high
quality research outputs. Although the U.S. private sector’s experience is much less
significant in many other systems where the private sector has experienced slow
development, the regulatory system may help in stimulating institutions to develop
their research capacity. Public policy should provide incentives for some private
institutions to adopt a greater focus on research and postgraduate training.
In several countries, particularly where there is no extensive history of PHE, the
new private institutions are often regulated as a separate system. The rules governing
private institutions (e.g., admission criteria, faculty qualifications, and so on) are
different from those for public institutions. This is either because of mistrust towards
the private sector, leading to the adoption of rules that make their existence more
difficult, or due to a lax attitude towards the private sector that helps to create a
perception among public opinion that the private sector would not be able to fulfil
the same requirements of the public sector.
Such practices produce two-tier systems in which the public sector caters to a
specific socio-economic group and the private sector serves a different group,
segregated either by social status, ability, or income level. Such a two-tier system
often is the result of interest group politics in which the coalition of existing interest
groups want to maintain the status quo, both in the public and private sectors. However,
such a two-tier system creates not only dissatisfaction among stakeholders, but also
has the potential to seriously compromise the effective development of the system.

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The development of balanced accreditation and quality evaluation mechanisms may

be a critical instrument in this respect.

4.2. Public and Private Benefits and the Funding of Higher Education

Higher education serves both private and public functions. For an individual, it is an
effective channel for higher income and better quality of life. Private benefits justify
private responsibility in funding and the individual freedom to choose the most
appropriate programme. The public or social benefits of higher education justify
government funding and its role in regulating the system. However, the government’s
right to regulate needs to be carefully balanced with individual freedom (of students
as well as private providers). The balance between public and private funding in
higher education is a complicated one, depending on the political and historical
context, as well as on the economic rationale.
Countries differ greatly in context and functions with regard to their systems;
thus, it would be both impossible and undesirable to come up with a single ‘right’
model of funding and regulation. Nevertheless, there are some generic guidelines for
policy choices. In general, limited public resources should be devoted to furthering
the public benefits of higher education, and private resources should be mobilised
in order to meet the private benefits. If too much public funding is mobilised (i.e.,
substantial private benefits gained from public funding), two dangers are likely.
First, it is widely known that public funding of higher education benefits upper class
students more, particularly if the funding is distributed by the providers. Second,
with high levels of higher education enrolments, reliance on public funding is
likely to create a pressure on government finance. Typically, this results in lowering
government support per student, which jeopardises the quality of higher education.
Too much reliance on private funding generates other problems. A system that
relies on too heavily on private funding may not adequately contribute to research
output and social cohesion because individuals would be less likely to devote private
resources in the generation of public goods. Second, private actors are less likely to
address the issue of unequal access to higher education by class.
The balance between public and private cost–benefit perspectives gains new
dimensions with the development of the private sector. These tend to rely essentially
on real-cost tuition fees, though some may argue that there is social value in their
activity (e.g., in terms of increased access to higher education, externalities, or a
better qualified labour force). Moreover, the activities of public institutions should
not be regarded as only having social value. They are also extremely advantageous
to those individuals that benefit from better education, both in terms of greater
employability and in higher average lifetime income. Thus, policy makers need to
rethink the traditional identification between public institutions and social value,
as well as between private institutions and individual benefits. This may have
important consequences in several dimensions of higher education policy, such as
funding mechanisms or student support mechanisms.

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4.3. To Pursue Effectiveness, Efficiency, and Equity in All Aspects of

Policy Making

Public funding in higher education can be distributed in many different ways.

First, it can be distributed through publicly owned institutions. The criteria for
the distribution of resources (e.g., the number of enrolments, quality of teaching,
or research output) may affect the incentives of the stakeholders, and thereby the
whole system. Public funds may be distributed to students rather than to providers
as a voucher scheme, merit-based scholarships, need-based grants, or loans. The
mechanism of the distribution affects the incentives of decision makers, and thus the
performance of the whole system.
Besides funding, government regulations also have a strong impact on the
performance of the higher education system. There are many areas where the
government may successfully intervene in the system, like the way students
are admitted and distributed across different institutions, the establishment and
governance of public and private universities, and so on. Needless to say, these
different areas are inter-connected and policy changes in one area affect not only the
directly regulated area, but also the other related areas. Any change in government
policy is bound to create changes in the system as a whole. Therefore, it is important
to consider the system-wide effects of changes in any subset of the system. For
example, the improvement in equity in admission policy may generate inefficiency
in distributing the public resources. Whatever mechanism that the government uses,
it is recommended that it should pursue the goal of increasing the performance of
the system by using the criteria of effectiveness, efficiency, and equity.
By taking private higher education as a part of the system, policy makers may
be able to use it more effectively to improve the performance of the system in
those respects. For instance, there needs to be careful regulation of private supply
of programmes to stimulate private institutions to respond not only to short-term
demands, but also to structural labour market trends. This should not heavily restrict
the autonomy and responsiveness of private institutions, but rather enhance the
external efficiency of the system. Likewise, the private sector can and should be
regarded as a powerful instrument to improve access and choice in the system. The
experience of many countries has shown that it does not need to be a mere elitist
alternative to a massified public sector. It can be a necessary tool to improve access
without creating major additional fiscal burden.

4.4. Carefulness about Possible Unintended Consequences

Sometimes, it is inevitable to make a substantial shift in higher education policies.

However, in designing and implementing new public policies, it is easy to overlook
possible unintended consequences. As usually happens, policies are politically
motivated and designed by a central bureaucracy, which does not possess enough
knowledge about incentives of the key players in the system nor does it have the

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analytical capability of predicting key side effects. Therefore, there are chances that
the new policies will create substantial harmful side effects.
Governments need to think about the long-term consequences of the proposed
policy, in addition to the short-term gains. Education is, by definition, a long-term
venture, as the number of years to finish formal education extends over a lengthy
span. For example, the introduction of universal secondary education when the
tuition for higher education is zero will inevitably create an explosion of higher
education demand several years later, and the fiscal burden of the government will
increase.
Governments also need to be concerned about responses of stakeholders when
a new policy is introduced. Consultations with stakeholders usually have positive
effects as they generate ownership. Negative collective responses may be minimised
if the process of policy making incorporates major concerns of the interest groups.
When sacrifice is required of some social groups, the rationale of the government
policy should be explained to them. Individual responses to the policy may be more
difficult to prevent, because individual incentives may not be compatible with policy
directions. In such cases, the government needs to assess whether the policy hurts
the interests of the majority of stakeholders. In addition, the government needs to be
willing to provide enough resources to enforce the policy when individuals violate it.

5. FINAL REMARKS

Around the world, higher education has been facing significant changes that have
reflected a massive growth in enrolment and increasing diversification of the type
of institutions, programmes, and students involved in this expanding sector. Private
higher education has been an important part of this process in many countries,
though the study of this phenomenon has received insufficient attention, especially
regarding attempts to look at it from a comparative international perspective.
In this volume, we have tried to contribute to this purpose by identifying common
patterns of development, major policy and institutional features, and challenges, and
by developing a common analytical framework that has been applied to four case
studies and that could be applied to several others. We believe that private higher
education will continue to be an important part of many higher education sectors and
that the development and integration of this sector within the higher education system
will continue to be a source of challenges for various stakeholders. In addition, it
will provide interesting research questions for those interested in this important part
of the higher education realm. We hope that this volume will encourage others to
think in a more comprehensive and comparative manner about such a fascinating
topic. We will certainly continue to follow its developments and to participate in this
fruitful dialogue between researchers, institutional representatives, policy makers
and various stakeholders, with the aim of helping to make private higher education
a valuable and serious actor in higher education.

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