I N T E R N AT I O N A L H I G H E R E D U C AT I O N Nu mb er 9 1 : Fa l l 2 0 1 7 15

and $125,000 in family income, because below that tuition maining 10 percent was derived from tuition fees and other
is already to some degree covered through grants. So the self-generated income. Public funds were also allocated
majority of the funding goes to an income class which has indirectly through scholarships, student loans, and annual
never had a great deal of trouble affording higher education stipends for individual students to purchase books, refer-
(at public institutions, anyway) in the first place. ence materials, and broadband subscriptions.
Since 2007, the Malaysian government has reduced
Policy Lessons funding for higher education. The allocation to public uni-
The key to making income-targeted free tuition both effec- versities is at present reduced to 70 percent, with 30 per-
tive and efficient is not to make the threshold too high. Even cent of the budget covered through self-generated income.
the Chilean government, once very keen on “gratuidad” The cuts have been particularly drastic the past two years:
for all, has belatedly come around to this realization. For in 2017, public universities received a total allocation of RM
budgetary reasons, the government was forced to limit its 6.12 billion, which represents a 19.23 percent drop from the
recent introduction of “free” tuition to students from fami- RM 7.57 billion allocation received in 2016.
lies in the bottom six deciles of income. This summer, the These massive cuts have not been well received among
Chilean Treasury Department published cost estimates for Malaysia’s academic community. Multiple calls were made
expansion of the program. In its present state, the cost of for the government to reconsider the budget cuts, not only
the fully phased program will be 607 billion pesos (about by vice-chancellors of public universities, but also by the
US$950M). Adding the next four deciles raises the price public, which is concerned with the quality of higher educa-
by about 350 billion, or 58 percent for each decile. That is tion delivered in an environment with limited resources.
to say, free tuition for everyone would cost over 2 trillion
pesos, or over three times as much as it costs for the bot- Rationales
tom six deciles. This difference is equal to 1.5 percent of It is rather convenient to use economic volatility as a justi-
GDP. And for what? The very fact that it costs so much is a fication for the current austerity measures. Fluctuating oil
reflection of the reality that participation from these groups prices and the depreciation of the local currency, the ring-
is already so high that they do not need government help. git, have reduced overall revenues and taxes, shrinking the
In short, while targeted free tuition makes lots of sense, amount of public funds available to the sector. It should
it really does need to be targeted. If targeting weakens, the be noted here that other sectors have not been spared: the
program becomes more expensive and less effective. New healthcare sector, for example, has also experienced re-
York’s plan, clearly, suffers from insufficient targeting. The duced funding in recent years.
Canadian and—unintentionally—the Chilean plans have it The gradual reduction of public funding to higher edu-
mostly right. As more jurisdictions experiment with target- cation is necessary. Malaysia ranks 11th out of 50 countries
ed free tuition, it will be important to grasp these lessons. for resources allocated for higher education, under the Uni-
DOI: http://dx.doi.org/10.6017/ihe.2017.91.9774 versitas 21 ranking of national higher education systems.
However, the country is 39th in terms of output and impact
on research, institutional excellence, and graduate employ-
ability. For a sector that receives significant public funding,
returns do not meet expectations. Citing outcome-based
Public Universities and Bud- budgeting, the government rationalizes its funding alloca-
tion to public universities, prompting them to be more ef-
get Cuts in Malaysia ficient in their operations.
The fact remains that the Malaysian higher education
Doria Abdullah
sector has expanded immensely. In 2012, there were 1.2
Doria Abdullah is senior lecturer at UTM School of Professional and
million students undertaking postsecondary studies, and
Continuing Education (UTMSPACE), Malaysia, and associate at the this figure is expected to increase to 2.5 million by 2025.
Observatory on Borderless Higher Education (OBHE). E-mail: doria@ With a twofold expansion anticipated in the next decade,
utmspace.edu.my or Doria.Abdullah@obhe.org. increasing public funding to support the sector is not a
sustainable solution. The budget cuts come at a critical and

M alaysia invests heavily in education. The tertiary sector

commands the largest share of the education budget.
Public funding is directly disbursed to 20 public universi-
timely moment, and public universities have to adjust to
the new norm.

ties in the country. In 2007, 90 percent of the universities’ Adjustments

operating budgets came from the government, while the re- Before the budget cuts, public universities were in a com-
16 Numbe r 9 1: Fall 2017 I N T E R N AT I O N A L H I G H E R E D U C AT I O N

fortable financial situation, with no pressure to generate in- five research universities—Universiti Malaya; Universiti
come through their core work. The funding reduction has Kebangsaan Malaysia; Universiti Putra Malaysia; Universiti
necessitated swift changes across all functions. It started Sains Malaysia; and Universiti Teknologi Malaysia—were
with short-term cost–cutting measures in administrative the first group of universities that were granted financial
functions, travel reimbursements, and events manage- autonomy, enabling them greater decision-making power
ment. Next, the institutions cut down on international fac- over student enrollments, academic management, human
ulty recruitment, academic staff mobility, and infrastruc- resources, and income generation.
ture development. This was followed by rentals and leasing The second agenda relates to performance indicators
of on-campus assets, increasing public consultancy servic- and specific functions that support the financial sustain-
es, and a push for commercialisation of R&D together with ability of the universities. The performance contracts of
industry. vice-chancellors include targets on revenue generation,
A hike in tuition fees might be a quick way out of the which affect the disbursement of future funding allocations
financial conundrum. However, the minister of higher edu- and overall performance evaluation. Other strategic func-
cation has given his personal reassurance that tuition fees tions include the deputy vice-chancellor for development,
for domestic students will not be raised. The universities who works with the business development unit to unlock
are negotiating a solution by calling for a tuition fee review, funding opportunities for the institution, and the deputy
which should enable them to gradually increase fees over vice-chancellor for industry and community affairs, tasked
time, or adjusting tuition charges to a student’s socioeco- to strategically engage with external players from the indus-
nomic background. International students enrolled at both try and from communities for academic and research col-
undergraduate and postgraduate levels pay full tuition fees, laborations.
which has encouraged universities to intensify internation-
al student enrollments. Unaddressed Gaps
Public universities are on a steep learning curve. Faculty
and administrators are finding it hard to adapt. It will take a
while to change mindsets and behaviors; many understand
Budget cuts will become a permanent the need to be more efficient and innovative in generating
fixture in the Malaysian higher educa- revenue, but balk at the thought of actual implementation.
Indeed, they may not have the fundamental entrepreneurial
tion landscape. competencies to do so. Faculties and departments are risk
adverse, preferring to maintain current initiatives rather
than discovering new ways of doing things.
Of great concern are changes in regulatory frameworks,
Universities are revisiting the functions of their alumni which do not reflect the autonomy status granted. In order
engagement offices, and initiating plans to better connect to generate greater income, universities must operate more
with their alumni networks. Contributions from the public like business entities. However, public universities were
to higher education are encouraged through endowments established under the University and University Colleges
and waqf, donations of assets and cash contributions in ac- Act of 1971 (amended in 2009), and are therefore still tied
cordance with Islamic principles. Universities have also set to traditional structures and investments. Universities also
up private entities that offer market rate, full-time academic have to navigate layers of approvals and paperwork required
programs and a variety of professional programs to the gen- by the ministry of higher education, the ministry of finance,
eral public. These initiatives, which are common elsewhere, and the Economic Planning Unit concerning budget alloca-
are becoming integral components of Malaysian public uni- tions, procurements, and other financial matters.
versities. Budget cuts will become a permanent fixture in the
Malaysian higher education landscape. The country could
The Ministry’s Agenda well take advantage of the current financial situation as an
The ministry of higher education is using budget cuts to opportunity to transform public universities, which have
push for two transformation agendas. to get used to leaner and more efficient operations, while
The first agenda relates to governance. The board of maintaining or increasing existing allocations for academic
directors, once a ceremonial and dormant structure in each and research activities. Additionally, the time is ripe for
public university, is now given the specific role of expedit- public universities to explore the uncharted territory of
ing decision-making processes. The board also performs transnational education (TNE), working with private and
annual assessments to evaluate their effectiveness. The foreign institutions to expand access to academic programs
I N T E R N AT I O N A L H I G H E R E D U C AT I O N N u mb er 9 1 : F a ll 2 0 1 7 17

through innovative TNE models. redressing past failures, arguably compounded them. A
DOI: http://dx.doi.org/10.6017/ihe.2017.91.10054 key reform was to reset the balance between public and
private debt proportions that supported the longstanding
national income-contingent loans scheme. Under existing
arrangements, students are liable for 42 percent of the cost
of their degree, an amount that is triggered only if the stu-
Another Missed Opportuni- dents meet specific conditions: graduating, gaining a job,
and earning an amount above an annual income thresh-
ty? Underfunding Australian old. Once all these conditions are met, graduates pay an
additional modest amount of income tax until the debt is
Higher Education cleared. Under the new arrangements, students would pay
Anthony Welch more, contributing an additional 1.82 percent each year be-
tween 2018 and 2021 for an ultimate total of 7.5 percent.
Anthony Welch is professor of education at the University of Sydney, This means that from 2021, students would be paying 46
Australia, and “Haiwai Mingshi” and PhD supervisor at Tianjin Uni- percent, instead of 42 percent, of the costs of their degree.
versity, China. E-mail: anthony.welch@sydney.edu.au. It remains to be seen if the proposed shift of the cost
burden toward students deters some from enrolling, par-

T he recent set of budget reforms proposed by the Austra-

lian federal government will only compound the exist-
ing funding problems experienced by the higher education
ticularly those from the more vulnerable groups in society.
Could the proposed reforms make higher education less at-
tractive, and perhaps even prohibitive, for some groups of
sector. Some of the worst cuts proposed by a previous min- students, particularly those studying part-time? The archi-
ister have now been abandoned, an acknowledgement that tect of the original funding scheme estimated that it should
they would never gain the approval of parliament. But it is not have a great impact on student debt, adding only about
hard to disagree with the conclusion of the vice-chancellor a year to the time it takes students to repay their loans.
of a major Australian university that, while that particular Much more significant is the substantial reduction in the
crisis has been averted, the current set of proposals repre- income threshold at which loan repayments begin—from
sent another missed opportunity to adequately fund higher $55,000 to $42,000—although cuts to the rate of collection
education. of the debt from 4 percent to 1 percent would mean that the
Government funding to the sector in Australia has fall- effects on most students will be relatively small.
en by 4 percent over the decade 1996-2006, while OECD Beyond changes to the student loans scheme, univer-
data reveal that funding for higher education across mem- sities would be hit with a direct cut of almost AU$400
ber countries has risen by an average of 49 percent over the million—AU$384.2 million over two years—in the form
same period. There was an expectation within the higher of an “efficiency dividend” to the Commonwealth Grant
education sector that the new prime minister, a supposed Scheme. This so-called efficiency measure is a convenient
reformer whose campaign centerpiece was the need for the euphemism for reduced funding, and adds to the ongoing
nation to prioritize science and innovation, would substan- failure by government to fund the full costs of research. If
tially raise funding for higher education and research. With implemented, the proposed cuts would represent an overall
at least two Nobel prizes in medicine in recent times, and decline in government funds of 2.5 percent in 2018 and a
internationally leading achievements in diverse fields such further reduction of 2.5 percent in 2019. The full package, it
as solar cell technology, biotechnology, and quantum com- has been estimated, would reduce public funds to the sector
puting, it could reasonably be expected that government by almost AU$2.0 billion over five years from 2016–2017.
would reverse previous funding cuts, adequately fund the When combined with changes to the way that university
sector, and fulfil earlier promises to support the full cost of grants would be indexed, it is clear that the intention is that
research. The leading, research-intensive “Group of Eight” universities would receive a smaller amount of funding per
universities, for example, which consistently win the lion’s student, and would thus need to do more with less. Clearly,
share of research funding, had long complained that succes- this is no solution to the funding problem; in fact, it would
sive governments’ failure to fund the full costs of research only aggravate a condition under which universities have
meant an increasing pressure on their research budgets. been languishing for some time.

The Proposed Reforms The Nonreforms

Despite such reasonable expectations, the sector was to be Abandoned in the current set of proposals were the worst
sadly disappointed at proposed measures that, rather than elements of the earlier, deregulatory budget for higher edu-