Why discussing the branch campuses’ bubble is the wrong debate

Posted on 20/07/2011

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It is the trend now to consider that the apparent proliferation of branch campuses worldwide is similar to a bubble and that it could suddenly burst.

The main similarity that I see with a financial bubble is that the same experts who were ecstatic about the internationalisation of universities 10 years ago are now promising a near doomsday.

What do we know about branch campuses? The latest study dates back from 2009, where there were 162 reported branch campuses worldwide, from 35 in 1999. On these 162, 40 were located in the UAE, 15 in China, 12 in Singapore, 9 in Qatar, 6 in Canada, 5 in Malaysia… 40 branch campuses were created by universities from the US, 14 from Australia, 13 from UK, 11 from France and 11 from India…

Since then, we can add at least HEC (France) in Qatar, INSEAD (France) in Abu Dhabi, Manipal (India) and Raffles (Singapore) in Malaysia and there are still new announcements regularly: for example, Limkokwing (Malaysia) opening in Uganda, NYU and Duke in China, Yale in Singapore…

 

Obviously, it shows a clear positive trend but does it mean that we are facing a bubble?

A bubble is characterised by a high difference between the price paid for a good or service and its intrinsic value, this price being favoured by an easy access to liquidities (for example when interest rates are low) and by different irrational behaviours by all the stakeholders involved, including the regulators not regulating anymore.

Translated in our industry, it means that universities would have been attracted by a “bigger bang for the buck” and would have invested heavily without anchoring these investments to tangible data, particularly a clear foreseeable return on investment.

 

First, it would be a bubble if there was no clear indication on the potential market (no buyers for the products of the new ventures). This is obviously not true. It is expected that by 2030, 158 million NEW students will enter the market. So, unless you consider that the thirst for higher education of young adults is a bubble, I see a clear existing and potential markets.

Second, there is no easy access to liquidities on overall. On the contrary, outside of few cases in the Gulf region, financing is a real issue for universities and business schools worldwide, public or private. So, any decision to spend money must be (at least should be) carefully taken, is scrutinised by the different stakeholders (senate of universities, boards, student unions…) and there is no room for uncontrolled spending as it was the case for example during the Internet bubble. The current debate in Texas on the performance of academics is a good example. So, the second condition for a bubble is not met.

Then, it is important to distinguish between the different regions where you find branch campuses: putting in the same basket the Gulf region, India, China and South-East Asia does not make sense.

In India alone, the goal is to raise the number of students from 13 million in 2009 (10 million in 2004) to 30 million in 2025. The country would need 1500 universities compared to 467 currently.

If we look at the past 20 years, there are now around 50 million students enrolling each year in the countries of East and South-East Asia, compared to 14 million in 1991. It is tempting of course to focus on the few failures, for example, the 20 million Australian dollars burnt by the University of New South Wales in 2007 in an attempt to open a full-fledged campus in Singapore. On the other side, there are remarkable successes. The University of Nottingham’s Ningbo campus (China) is cited as a success by the UK HE International and Europe Unit (http://www.timeshighereducation.co.uk/story.asp?sectioncode=26&storycode=416863&c=1)

Curtin University (Australia) has 3000 students on its Malaysian campus and moreover from 40 different countries, showing that its attractiveness is far beyond the local market. RMIT (Australia) has now more than 5000 students in Vietnam and is expanding its 2 campuses. Of course, it was after a failed attempt to run a campus in Penang (Malaysia). But some business failures here and there do not mean that there is a bubble. It is the natural course of business, as for any other industry.

 

With no doubts, there is an issue in other parts of the world and particularly in the Gulf region as it has been discussed a lot already (see: http://www.universityworldnews.com/article.php?story=20110715164537795 ). But for the other regions where we see a rise in branch campuses, it is sustained by the constant growth in the demand.

That’s why discussing always the case of branch campuses is not the right debate.

If there are issues in the internationalisation of higher education, taking a larger scope is a way to find them.

First and foremost, discussions should integrate all the international initiatives of universities and integrate joint-, dual-degree and twinning programs. It is generally not done as it is more difficult to track numbers (and academics like to discuss with data!). In China for example, while there are only 15 branch campuses, there are 580 dual or joint-degree programs. And evidence shows that there are also numerous twinning programs in the Gulf again (Dubai and Oman for example), in Singapore and in Malaysia. So, if there is an oversupply of programs, the problems lies certainly more in the proliferation of these agreements. And these agreements are generally the ones posing difficult questions on the quality control and on the financial aspects.

Then, if the question of oversupply must certainly be asked in emerging economies by integrating all the international programmes, there are very clear signs of oversupply in other countries which are barely discussed. These are the countries where, because of the demographics, there are already or there will be very soon too many tertiary institutions: Japan, South Korea are in this situation. Germany could be soon. And we should not forget that if Australian institutions started to recruit heavily abroad 10-15 years ago, it was mostly because it was the only way to survive to the negative demographic trends at home. If the supply of foreign students was to stop, several of them would be in trouble. And in UK, 15% of the student population is made of foreign students, and 68% of these foreign students are coming from outside the EU. Why if they stop studying in UK because it is cheaper and of equal quality in their home countries? How does it fit in the White Paper?

These questions are to me much more important than the debate on the branch campuses and should be discussed more regularly by the experts on international higher education.

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