From I Lourdesamy

Private education is important. Ideally, all education should be public because education is a public good. But this is not possible simply because governments everywhere do not have the resources to meet the growing educational needs of their citizens.

This has attracted the business sector into education. In 2018, Malaysia had 447 private institutions of higher learning. There were 53 private universities compared to 20 public universities.

Private higher education contributed RM31.5 billion to the Malaysian economy in 2018. In 2018, 50.3% of all students in tertiary education were in private institutions (statistics taken from the Ministry of Higher Education Report 2020). It is government policy to encourage the growth of private education. In fact, the target is for Malaysia to become an education hub for the region.

This is not where the problem lies. The question is: Is private education equitable? By that I mean whether private education is providing sufficient access to all Malaysian parents, or is it becoming increasingly exclusive.

This is an important question because education is a public good, unlike other services in the market. As a public good, there must be sufficient access to it. If access is exclusive because of cost, then there is a need to revisit private education, its role and operations.

I use international schools as a case in point. Not long ago, locals were not allowed to enrol their children in international schools. The schools were restricted to foreigners working or living in Malaysia.

The schools were expensive as they targeted a specific segment that could afford the high fees charged. The rationale behind the schools was clear – to prepare expatriates’ children for overseas education.

The locals went to local institutions or overseas for education. Gradually, international schools were opened to locals, mainly because of pressure from local elites who wanted an exclusive education for their children.

As demand grew, more international schools were established by businesses to provide education from nursery to “O” and “A” levels or their equivalent. The original purpose of international schools was replaced with a business motive. This has given rise to several concerns.

The analysis below is based on data from several international schools. There are differences among the schools, some charge more and some less. But the figures used are representative.

For a Grade 1 (Standard 1) child who is five years old and just beginning elementary education after nursery, the cost to the parent for a year (three terms) is around RM25,000. Some schools charge a lot more.

Extras, such as swimming classes, art and IT, are charged separately. There are also application and admission fees. A school year is normally nine months. The rest is holidays. With all the extras, the fee works out to about RM25,000–RM30,000 for a year for a child who is in Grade 1.

For this, the child receives about five hours of “schooling” a day (essentially, play and fun at this level). For the same amount of money, parents can put their son or daughter through an MQA (Malaysian Qualifications Agency)-accredited MBA programme in a local university.

Of course one can say this is not a valid comparison. Classes in international schools are smaller and there is more personal attention. The facilities are also different. For MBAs, you are dealing with adults. In international schools, you are dealing with children whose needs are different.

Granted the differences in the teaching and learning processes and the cost structure in international schools, one still cannot justify the high fees charged. It is difficult to explain to someone that teaching a five-year-old in Grade 1 for one year is as expensive as completing a full MBA programme.

It is true fees in private colleges are regulated by the authorities. But there is provision to increase fees. International schools increase fees periodically, every three years or so. Some increase fees every year. The increase is anywhere from 3%-5%. Also, tuition fees are different for different levels.

A kid in Grade 4 pays more than someone in Grade 1, about RM35,000 a year. I am not suggesting the education ministry determine the fees. That would be from the frying pan into the fire. All I am asking is whether the fees in international schools are equitable. Any argument that our international schools and private colleges are cheaper than those in other countries is irrelevant. Our private institutions have to stand on their own.

As you move up from Grade 1 in an international school, you pay more and more. The fee for the GCE “O” level (Year 11) is close to RM55,000. For the “A” level, it is around RM50,000. The total fee parents would have to pay for their child enrolled in Grade 1 to the completion of the “A” level is between RM600,000 to RM700,000.

Some estimates run close to a million ringgit for some international schools. This is the money that the parents have to spend before their child ever sets foot in a university for degree studies. Do international schools have to be so expensive?

International school operators will say yes. Their argument will rest on cost. They will argue that the cost of running a good international school is high. They need to provide a variety of facilities. It costs money to build a campus and maintain it.

Facilities have to be added and upgraded. Teachers have to be trained to enhance their professional skills. Many of the teachers are from overseas who cost more to employ. There is the cost of administration.

Frequently, the principal is an expatriate. If international schools do not provide these things, they would not be able to compete in the market. Parents and regulatory bodies also want to see these things.

This thinking is faulty. This is a cost argument for high fees. International schools and private colleges fall into the trap of cost-plus pricing. Their fees are based on costs. Costs invariably go up because the institutions want to provide more and better “facilities” and “goodies” to remain competitive.

These push up costs. Costs push up fees. They get caught in a vicious cycle. Until they can think differently, costs and fees will keep going up and access to international schools will become more and more restrictive.

Even the middle-class parents would not be able to afford them. International schools will become more and more elitist, on the model of the public schools in the UK. This would not be socially responsible in a country like Malaysia.

To advance the argument that parents who cannot afford the fees can always send their children to government schools is a poor rebuttal. While international schools are not meant for everybody, neither should they exclusively serve the rich. A middle ground is needed. This is possible.

Private colleges, including international schools, should reverse their thinking. Start not with costs but equitable fees to maximise access. Then design the operations and the facilities. In this model, costs do not determine fees. Equity and access determine fees. Fees determine cost of operations.

Cost has to fall within revenue based on the fee decision. This means there are costs the institution can incur and cannot incur. This reverse thinking will shift the focus from “facilities” to “affordable education”. The upward spiral of costs and fees could be contained.

The relationship between facilities and quality of education is nebulous. I set up the PJ Community College (PJCC) in 1984 to offer the American degree transfer programme. It was located above the Thrifty Supermarket on Jalan Barat, Petaling Jaya. It was crammed. Sometimes the roof leaked.

Yet, PJCC had the best American education programme then. It is a myth that quality is a function of facilities. International schools can provide quality education to a lot more students with less costs and therefore lower fees. The key question is: Are you in education or in business? The day private education was labeled an “industry”, the shift from education to business began.

Private education in Malaysia has been around for a long time, but its objectives were different those days. Back then, it filled the gaps in the public education system. Institutions like Goon and Stamford offered programmes that were vocational and professional.

The education ministry itself offered classes in the evenings for working adults. They were called Further Education Classes. I was one of those who attended these classes in Anderson School, Ipoh in 1958, completed the Higher School Certificate and went on to the University of Malaya.

The Varghese brothers set up Vanto Academy in Petaling Jaya in the 1970s for dropouts from the public school system and to provide access to students wanting to do STPM. I established PJCC because I saw a gap in the system for American education.

In the technical area, there was the Federal Institute of Technology and the Worker’s Institute of Technology. There were the tuition centres. All these institutions and programmes had specific and limited goals in mind, unlike now.

Today, private education is a parallel system, with different objectives and operations from the past. Education has become a private good, with all the inherent conflicts between education and business.

I am not against private education. I’ve been in private education for the last forty years. I know the challenges, constraints and potential. Private education has developed to occupy a respectable position in our education system.

Some of the private tertiary institutions have better international ratings than the public universities. There were over 650,000 students enrolled in private institutions of higher learning in 2018 (Ministry of Education Report).

Total enrolment in private schools in 2018 was over 850,000. The statistics are clear. Private education is significant to the country, both educationally and economically. All I am saying is for private education to be more socially responsible.

My objective is to raise the level of self-scrutiny in private education, lest we forget our educational mission in the pursuit of business objectives. Private institutions should be in education, not business.

There is a business element, but it should be confined to generating enough revenue to sustain and grow the institution, with some surplus for the investors. The objective should be social, to benefit the young from the programmes offered and help them achieve their aspirations.

It is a social mission. If return on investment is the goal, the proprietors of private institutions should look elsewhere for investment opportunities. Education is not the right sector for such investments. If businesses treat education as an investment opportunity like any other, then the issue of high fees and limited accessibility will remain.

Institutions will compete on the basis of size and facilities. Fees will keep going up. These institutions have to meet their rising costs from student fees. You can have high costs and reasonable fees only if you have other sources of revenue, like endowments and government grants.

The Ivy League schools (private) in the US have huge endowment funds that generate revenue to pay for the operations of the universities. The fees they collect from students only meet 30%-35% of the operational costs. The endowments help the Ivy League schools keep their fees within reason.

Our private institutions do not have such funds. Neither do they receive any grants from the government. They try to meet all operational costs and create a surplus from fees alone. As operational costs go up because of competition, fees go up.

The only way to keep fees reasonable is to reduce operational costs. This can be done. The starting point is to set the fees first. The primary consideration should be accessibility – how many can afford the fees to enjoy the programmes offered.

This is an educational decision, not a business decision. Equity and accessibility should dominate the fee decision. I believe international schools can bring down their fees 20%-25% or more if their mission is redefined, frills removed and costs cut.

Once the fee and therefore the revenue decision has been taken care of, the rest will follow. The structure and the operations of the programme will fall within the revenue planned. Costs will follow revenue.

What facilities to offer, what salaries to pay teachers and staff, the size of the operation, and numerous other cost decisions will fall in place. Things that are nice to have but not essential will get eliminated (zero-based budgeting). The institution will compete not on “more and bigger is better” but on selected differentiation.

This reverse thinking will put the interests of students and parents first and business after. The spiraling of fees can be checked. International schools and private colleges will become accessible to a larger spectrum of Malaysians.

It is interesting to see Vincent Tan, the business tycoon, echoing this thinking recently when he said the private sector should be prepared to design, build and sell affordable houses with a price range of RM250,000-RM300,000 for a 900sq ft apartment. He is talking about fixing the price first and then building the apartment within the price. I am suggesting the same strategy for private education.

This is not to say private institutions are not doing anything to help out students with fees. They are. They offer various forms of financial assistance, including subsidies, scholarships and grants. They help to obtain PTPTN and bank study loans. But these do not address the structural problem in private education which is responsible for the growing high fees.

Regulatory bodies like the education ministry and the Malaysian Qualifications Agency (MQA) are partly responsible for the high fees. Delays in programme approvals push up costs and therefore fees.

Unrealistic requirements in facilities and faculty in the name of quality are a cost to the institution. Costs can come down if there is more realistic regulation on the part of the authorities. There is much duplication of facilities and assets in private education.

The regulations do not allow the sharing of these. If facilities and assets can be shared by institutions, costs can come down significantly and the benefit passed on to students with lower fees. The sharing can also be with public universities and institutions.

Millions of ringgit of public money have been invested in them. They have assets and facilities that can be deployed by private education. For this to happen, you need a holistic understanding of education. This does not exist now.

Finally, the problems parents face with high fees and accessibility to private institutions of learning can be alleviated if the public institutions do a good job. Parents go to international schools because the public schools are failing in quality and relevance. If we had the schools that were around when I was schooling in the 1950s, there would be no need for international schools.

Dr I Lourdesamy is an FMT reader.

The views expressed are those of the writer and do not necessarily reflect those of FMT.