Looking Back to See Ahead

The effects of the Asian financial crisis of 1997–1998 and the response by governments tell an interesting story. In the case of Southeast Asia, the intensity of the crisis' effects varied somewhat across countries depending on their economies, share of public and private institutions, and college enrollment rates in domestic and international institutions. However, governments shared a number of response patterns.

Indonesia shifted the share of education resources toward basic and away from higher education. As Purwadi (2001:71) noted, “the crisis simply prevented pupils of low economic status from affording even the least costly university education.” Applications declined at elite private colleges and universities, but some households were able to shift over to less expensive public colleges and universities, while youth from poor households were more likely to drop out. Economic subsidies from the government were reduced even while some institutions endeavored to cut or eliminate tuition fees for selected poor students. Institutions were differentially affected and some gained more financial independence and autonomy as they were forced to find alternative ways to mobilize resources.

In Malaysia, the middle class was particularly hard hit. When funds for overseas study were drastically reduced, enrollments at public institutions shot up even while the government instituted austerity measures that cut operating and development expenditures by 18% (Hassan 2001). Low-income Bumiputra¹ were hard-pressed to continue in higher education. The pressure increased as public universities were corporatized and many established foundations and subsidiaries to mobilize funds. The government responded with a National Higher Education Fund to help students afford study fees. Malaysian students overseas returned home and public-private higher education franchising developed further.

Thailand's higher education budget declined during the economic crisis. Investment expenditure was halved. Student loans were made available on a wider scale. However, the number of students applying for places declined by 30–60% and private vocational colleges could only meet a third of their targets (Varghese 2001). Dropout rates increased as children helped support their households. When enrollments began to increase again, it was in the public sector, with a 23% rise. Also, similar to Malaysia, fellowships to study overseas were canceled.

Similar effects were apparent in the Philippines, where the economic crisis initially stalled higher education enrollments, particularly in the private sector, and where quality remained a key concern. Philippine households cut expenditures on nonessential goods, and education's share of the total household budget increased slightly from 10.0% to 10.3% on average between 1997 and 1998. The government provided scholarships on a limited scale. The focus was on wider social-protection strategies supported by international donors (Ablett and Slengesol 2001).

Across developing countries in Southeast Asia, college and university budgets were sacrificed in favor of school budgets. The switch from private to public institutions increased, while government subsidies or loans helped alleviate some of the hardships. More domestic study—rather than overseas study—refocused the goals of higher education. Private institutions suffered, but in some countries they formed franchises with public institutions. Public institutions became less dependent and more autonomous, and in some cases became corporatized. Twinning opportunities with overseas institutions increased. The biggest victim was quality, as investment components and governance reforms were delayed in favor of merely sustaining recurrent expenditures for minimal survival.

One worthwhile effect was that institutions gained more autonomy and responsibility for fund raising and a more entrepreneurial spirit. However, sustained reforms in governance were minimal and the quality of instruction and relevance of research remained among an assortment of areas in higher education in need of reform. As the effects of the global recession linger, there is good reason to consider how to foster innovative reforms.

Among developing countries, the People's Republic of China (PRC) capitalized on the Asian financial crisis by expanding higher education when job markets weakened but household savings and family values were substantial enough to support enrollment fees. While expansion occurred largely in the state sector, the PRC also encouraged non-government colleges to expand, thus providing more opportunities to those from previously underserved populations. Meanwhile, it consolidated resources to attain economies of scale, introduced reforms in personnel administration, strengthened its assessment of the quality of instruction, and still managed to support the development of world-class universities.

In general, Asian colleges and universities have a checkered past in weathering recession and economic shock, especially as they impact on particular income groups, regions, and sectors of the labor market. Inadequate government responses may be due to anachronistic assumptions about the role of higher education in development. This paper argues that any further delay of substantial reforms in the governance of higher education during recession runs the risk of a long-term handicap to global competitiveness and sustained hardships for underserved vulnerable populations. Mongolia and Viet Nam are two examples of nations that are facing important decisions as to how to proceed in the reform of higher education during the global recession.

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