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A Historical Review Of Malaysian Higher Education

The higher education system in Malaysia has since the independence in 1957 been generally treated as a unique global public good due to the inherent positive externalities that are associated in its provision (Sirat et al., 2010; Sirat, 2005). Under this arrangement, the government of Malaysia has had great monopoly over the provisions of higher education system until the early 1990s when a policy shift to the private higher education was established and encouraged in order to actualize the expected growth in higher education system (Malek, 2000). This was primarily designed to meet the growing needs for higher education system among the increasing number of both the domestic and global population that needed university education. The difficulties in attaining the desired provisions of higher education system between 1957 and 1990 were as a result of low budgetary constraints to higher education compared to the allocations that goes into primary schooling (World Bank Report, 2000). Whereas, research have shown that the excess demand for the higher education system in Malaysia was being supplied by the overseas higher institutions of learning, majorly by the United Kingdom, United States of America and Australia (Ishak et al., 2008, Sivalingam, 2006). Given the high cost of studying abroad, the Malaysian government came up with scholarships to support the domestic needs of its citizens that want to study abroad.

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Some critical arguments that were raised then are why the government did preferred overseas higher education to licensing private universities in Malaysia. Meanwhile, other factors eventually lead to the need for a change in policy such as the external shock that affected the Malaysia economy between 1985 and 1986, the Reagan/Thatcher doctrine during the early 1980s; Malaysia growth in multinational enterprises which created the need for university graduates; and the new government policy called “vision 2020”. All these and many more necessitated the need for the introduction of the Private Higher Educational Institutions Act in 1996, which serves as the legal and regulatory framework upon which the privatization of higher educations in Malaysia and the licensing of the establishment of local branches for foreign universities, and local private universities and the university colleges were all based. The acceleration of the education sector was further liberalized after the 1997 financial crisis in East Asia which subsequently led to the sharp devaluation in the value of Malaysian Ringgit, one of the main factors that made foreign education unaffordable for many Malaysians (Sirat et al., 2010).

The aftermath of the 1997 financial crisis led to the loss of comparative advantage by Malaysia in its production of the labor intensive goods, further creating the needs to search for alternative means of production that are more technology intensive oriented in the productions of goods and services that will generate the required growth. In order to effective do this, the government felt the need to expand Malaysia’s higher education sector so as to create the anticipated knowledge economy that will support the productions of technology intensive goods and services (Abu Hasan, 2008).

The Development of Higher Education Provider (HEP) in Malaysia

Following the aforementioned historical development of higher education system in Malaysia, this section comprises of the effects of the monopoly that was enjoyed by the government in the provisions of higher education institutions in Malaysia. Existing literatures shows that the first university in Malaysia is the University of Malaya that was established in 1962, five years after Malaysia independence (Sirat et al., 2010). Following this was the establishment of Science University of Malaya, now called Universiti Sains Malaysia (USM), which was set up in 1969. In that same year another proposal meant to set up a private University to be called Merdeka University was subsequently denied permission by the Malaysia government. The continue increase in the market demand for higher education eventual led to the establishment of the third University in 1970 popularly called the National University of Malaysia or Universiti Kebangsaan Malaysia (UKM). The year that follow also saw the establishment of another public university called the Agricultural University of Malaysia or Universiti Pertanian Malaysia (UPM) in the year 1971 and the Universiti Teknologi Malayisia (UTM) also called Technology University of Malaysia in 1972 (Morshidi, 2005).

Each of the above five universities were primarily designed with their individual their specific roles and functions that are meant to explore the opportunities in the economy and proffer alternative solutions to the societal problems (Muhammad et al., 2009). Some argued that the University of Malaya was designed as a colonial vintage that is meant to produce the needed elite for the development of Malaysian economy (Sirat, 2005). Similar to University of Malaya is Universiti Kebangsaan Malaysia, a university that was established to create a unique centre that will serve as the Malay intellectual discourse. Both the Universiti Sains Malaysia and Universiti Teknologi Malaysia were designed to produce future scientists and modern technologists that would supplement the required growth. Evidence has shown that the current trend in the economy has made the Agricultural University of Malaysia to expand its content of graduates beyond the Malaysia’s agricultural revolution. This is because enrollments into the public universities eventually doubled between 1970 and 1980 and still wasn’t sufficient in meeting the required demand for higher institution for Malaysians within the ages of 19-24 years that have been seeking university education abroad.

In order to meet up with the needs for higher education system, the Malaysia government continued with its educational policy of expanding the higher education institutions by increasing its expenditure on university education for local public universities (Islam and Cheng, 2008). However, this continuous expansion was argued not to be sufficient for higher education demand in Malaysia. Evidence in some literatures showed that in 1980 about 19,500 Malaysian university students were studying degrees in foreign country, a figure which was quoted as slightly less than 20,045 students that are studying in the local public universities (Sirat, 2005).

To further bridge this gap, the government embark on expansion of the university education from 1980 to 1990 by setting up International Islamic University (IIU) in the year 1983 and the University Utara Malaysia (UUM) in the year 1984. The government was said to establish IIUM to specialize in generating Islamic degrees, but UUM was to specialize in providing management courses (Sirat, 2005). What actually led to the emergence of the private university was the continuous increase for degree courses which was quoted to have increased almost three times between 1980 and 1990, specifically from 20,045 in 1980 to around 60,000 in 1990. The government justified this expansion on the grounds that there is the need to increase the current higher education in order to be able to increase the needed manpower that is required for economic expansion due to the high inflows in foreign direct investment in Malaysia (Kamogawa, 2003).

After a strong deliberation on the potential growth in the inflows of foreign capital into Malaysia economy by late 1980s and the subsequent demand for highly skilled manpower, the government of Malaysia argued in favor of establishing private institutions of higher learning that will provide basic facilities for the pre-university courses such as certificate and diploma courses, with emphasis on technical subjects (Ahmad et al., 2007). The government believes such expansion in higher education will also assist in reducing the outflow of foreign exchange in Malaysians studying abroad.

Millennium Development Goals in Private Higher Education Institutions


Literatures on higher educations have shown that in a decade ago topics on private or non-government higher education institutions were not globally discussed and yet literatures have indicated that over this period the provision for private higher institutions has increased exponentially in several countries (Lim, 2008). This part of the research provides a brief overview of the private and non governmental higher education institutions till 2009 and equally examines some important themes that relate to the provisioning of private higher education institutions (PHEIs) in the global market. Discussions under this part are not meant to be an in-depth exploration of the topic, nor that is it meant to advocate for private institutions to replace the public education system. It is primarily meant to examine the roles of the private higher education in meeting the need for the required demand for access to qualitative education system.

Some scholars have argued that the successes that have accrued to the education sector through the Millennium Development Goals have led to an unprecedented demand in higher education system (Newman and Couturier, 2002). This is because many governments have heavily invested in early the childhood and the secondary education system, further resulting in high numbers of qualified learners that have caused the current inadequate provisions that are available to meet higher education demands (Aihara, 2009). Literatures have shown that the demand for places in the higher education system far outstrips the supply of the available seats globally (Arokiasamy et la., 2009). Authors such as Abu Bakar et al (2009) have predicted that the demand for the higher education system globally would have expanded from the 97 million students in 2000 to around 262 million students by the year 2025. All these formed the basis the arguments in favor of the private higher institutions whose market has been estimated to have reach US$400 billion in 2006 worldwide and has continue to grow particularly in developing economies (Lim, 2008). Some argued that the above figure may be much more higher because of the difficulty that are inherent in quantifying the investment in infrastructures such as cost of land and constructions and other capital investments that are put in by the private providers of higher education (Erk, 2009). Similarly the Private Higher Education Institutions can work individually or collectively in identifying new skills that are required in regions where there are promising industrial growth such as the information technologies or the engineering. This is because they are more cost efficient than the public higher institutions, given the fact that they are not carrying the same employment and infrastructural constraints as the public sector (Bjarnason et al., 2009).

Criticism against Worldwide Development of Private Higher Education Institutions

Issues of infrastructural constraint that are being faced by the public education system was also argued has leading to some criticisms and arguments against the private education providers that they only offer niche courses that are in greatest demand such as the business courses so that they could charge premiums (Suryadi, 2007). Some even argued on their attitudes towards conducting academic researches, and that lack of such quality should not deem them as an academic institution of higher learning. While there are many available arguments in support of the above criticism, other literatures do show that there are situations where private universities are being established by known individuals and some philanthropic organizations that saw a failing public sector and determined to come in with a strong ideological and financial support that will redress this lack of qualitative education system (Guruz, 2008).

This current study is being conducted at particular time when the world is currently experiencing a global financial crisis, whereas either the depth or the breadth of the crisis are yet to be clear to the stakeholders and thus making it difficult for determining or measuring its impact on education sector. Meanwhile, scholarly arguments have suggests that higher education fares moderately well during economic downturns as this, mainly because people will like to use that opportunity to engage in retraining programs with the general hope of having additional advantage during economy recovery. Private higher education is a good alternative in economic situation such as this, because public government funding is currently inadequate in meeting the expected growth in demand for higher education in all levels, and thus making the non-governmental provisions is rapidly expanding (Arokiasamy et la., 2009). In a recent report by the World Bank in 2009, experts argued that required supports by the government and all other stakeholders ought to be prioritized in crisis times such as we are now (Aihara, 2009). Therefore this current research has provided important guidance to the policymakers on how to measure their business performance index at critical economic downturn that Malaysia and the world at large is currently facing.

Global Growth of Private Higher Education Institutions

Existing literatures have established that the Private Higher Education (PHE) has captured huge attention in the education industry given its tremendous growth in size and revenue in recent decades. The continuous growth in PHE has occurred on a global scale to the extent that the previously marginalized countries have mostly attained a sufficient level in PHE in compared to those countries with longer standing in the provision of PHE. Importantly, much of this development in PHE was said to have occurred between the late nineteen and twentieth centuries, creating another dimension to the public sector affairs that was common in the provisioning of higher education in the past. Bigger percentage of this development in the transformations from the small to the large private enrolments of students in PHE was argued to have mostly taken place in the developing and transitional countries (Aihara, 2009). Below is table 1 that aptly depicts private enrolment in some of the developed and developing countries in the world.

Table 1: Private higher education enrolments: Some examples

In contrast to the above information in the table, some literatures have established that some developing countries still remain under 10 per cent enrollment and many of them are said to be experiencing more than 60 per cent in PHE enrollments. Meanwhile Guruz (2008) have argued that around 30 per cent in the global higher educations’ enrolment are currently in the private higher education institutions (Guruz, 2008). In that same study Guruz (2008) went further to argued that no existing region in the world do stands out from the current PHE growth. In addition to the information above on the global enrolment PHE is figure 1 below, that summarize Asia’s private enrolment by country between 2001 & 2007.

Figure 1: Asia’s private enrolment and institutional shares by country (2001-2007)

Source: International Databases, Program for Research on Private Higher Education

(PROPHE), available [on-line] at http://www.albany.edu/dept/eaps/prophe/data/international.html.

The above ranking of private/total Higher Education (HE) enrolment by country has provide detail precisions for each regions has this had helped us in identifying the basic high to low spreads in enrolment. Asia being the most populated region in the world actually comes first, with East Asia containing the highest of concentration of countries that are with the proportionally largest private higher education institutions (Arokiasamy et la., 2009). This specific evidence could be seen in Indonesia and the having over 70 per cent private enrolments, while Malaysia is quoted to be standing t around 50 per cent in private enrolment (Gupta, Levy and Powar, 2008). As could be seen in figure 1 above, much of the Southeast Asia countries such as Thailand and Viet Nam private enrolment stands below 15 per cent.

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Reasons behind the dramatic growth in PHE

Financial Consideration

One of the major reasons that have led to the continuous growth in PHE was argued to be finance. This is because higher education provision is very expensive nowadays if compared to the basic and secondary educations, making it difficult for the government institutions to fund the required expansion. This scenario has led to two main consequences; (1) Government policies in transferring some of these costs to students in form of administrative charges and tuition fees and (2) new favorable policies towards the establishment of private higher education institutions. Looking at it from financial terms, one would agree to the fact the advent of these private higher education institutions primarily represents strong fundamental shifts from purely public goods that are publicly financed to shared public/private goods, that are joint financed by both the government and the private stakeholders (Arokiasamy et la., 2009). This further confirms the private education providers as the agent of relief to the state in the contribution of skilled manpower to the economy. Noticeably, some have argued on issues of taxation has having a negative impact on the operations of the PHE, an issue that has compelled the PHEIs to transfer those cost to the final beneficiaries (Aihara, 2009).

The Emergence of Private Higher Education in Malaysia

Like all other developing economy, there has been tremendous entrant of private education providers in Malaysia at different levels. In order to understand the present situation as regards the provision of higher education, it is important to understand the emergence of the private ownership of education. The year 1970 marked the genesis of the private participation in higher education (Shirat, 2005). This was started through the provision of pre-university programmes, the providers of twinning, awards of external degrees and professional programmes. As this grows, in the 1980s, there were provision of 3+0 programmes and local degrees in the late 1990s and this no doubt changed as agents for “democratization” and “internationalization” of Malaysian higher education in 2000s. According to Kanji, (2000), the implementation of New Economic Policy (NEP) in 1970 further assisted in the development of PHEI. Two aspects NEP related to higher education are the introduction of the racial quota system as the basis for entry into public institutions of higher learning and also the restrictions of PHEI to confer degrees (ibid). The need to introduce this policy after the establishment of the NEP and the approval of permission to PHEI was deem necessary in order to protect possible tactical exclusion of the Bumiputras by the non-Bumiputras. As a result, many non-Bumiputra (non- natives) were compelled to seek higher education overseas. In the same vein, the period between 1970s and early 1980s, marked the migrating seasons for the Malaysia students; this time, there were large movement of students from the country who were going abroad to read. This then appeared as an opportunity for the private education providers to come in and take advantage of the government policy, pre-university courses were offered to those students who wanted to travel abroad to study. As Lee (1999) pointed out, this practice became much bigger than planned as a result of the fact that even those who couldn’t afford to go overseas for their degree studies were offered various courses to provide them to take up employment in Malaysia. Escalating rise in overseas tuition fees has limited the access to higher education to only the rich (Lee, 1999). Thus, PHEI played an important role of providing alternative avenues for those who preferred to pursue higher education locally or as a second chance for those who failed to gain admissions into local public universities (MOE, 2001).

One important consequence of this was the economic impact of students’ attempts to go overseas to read was a huge currency outflow which created a very good impression about Malaysia in the face of international community. According to the report by OECD, Malaysia was one of the fewer countries with the highest number of students traveling to Organization for Economic Cooperation and Development countries (OECD) countries for University education. In a report by OECD, Malaysia was third with a total of 32,709 students in 2001 alone and eleventh position worldwide (OECD, 2003). Recognizing the impact of Malaysia in the provision of higher education, the country has been equally been ranked third most important provider of international higher education. According to Nelson, (2003), Malaysia recorded 14,748 students in 1999 (9,545 onshore and 5,213 offshore), 17,840 students in 2000 (9,866 onshore and 7,974 offshore) and 17,678 students in 2001 (9,467 onshore and 8,211 offshore). However, where it appeared that certain people cannot afford to go abroad for their higher education, certain options were provided for tem whereby they can get this degree by enrolling for external degree programmes such as the University of London law degree or professional programmes, Malaysian Institute of Certified Public Accountants (MICPA), Association of Chartered Certified, Accountants in UK (ACCA), Chartered Institute of Management Accountants (CIMA) and Institute of Chartered Secretaries and Administrators in UK (ICSA) and others (Lee, 1999). Due to this, students might choose these programmes as a chance rather than as a choice. PHEI also facilitated “brain drain” among Malaysian students who were frustrated with the higher education policy then. First signs of liberalization of higher education in Malaysia were felt in the mid 1980s with the emergence of off-shore twinning programmes offered by foreign universities in PHEI and programmes validated by foreign professional bodies.

Even though the private universities were allowed to compliment the public universities, their roles were still confined to providing alternative avenues for those who preferred to pursue higher education locally or as a “second chance” for those who failed to gain admission into local public universities. However, critics like Jomo has argued that although government expenditure for education has always remained relatively high, education policy has long been preoccupied with achieving interethnic parity in educational attainment, even at the expense of limiting overall educational development. According to Jomo et al (1999), though the intention of the government was to liberalize the education sector by allowing the private providers, there is still glaring shortage of human resources especially in the areas of law and accountancy. One other importance of PHEI is that they also act agents to foreign institutions though this has been as a very higher cost to potential students.

The Private Higher Educational Institutions Act, 1996

If we must understand the working of the higher education in Malaysia, there must be a trace of history to the enactment that gave birth to that existence. There was a law called the Private Higher Educational Institutions Act of 1996. This Act was the sole power that liberalized the education sector and provided the legal framework for the establishment of twinning arrangements between public and private institutions in one side, foreign and local institutions on the other side; the establishment of private universities, branch campuses of foreign universities and other forms of private higher educational institutions. It’s in this Act that provisions were made to upgrading of existing institutions from colleges to universities. The liberalization was considered necessary in order to satisfy the increasing demands for higher education by the Malaysian citizens. In order to also have comprehensive laws governing the overall activities of the education sectors, certain other laws were also made along with the Private Higher Education Act of 1996. These included the Education Act, 1996, the University and University Colleges (Amendment) Act, 1996, the National Accreditation Board Act, 1996 and the National Council on Higher Education Act, 1996 (Arokiasamy, et al, 2009)

Mention must be made here that education sector has received a very important attention in the last years especially by the parliament. A few years after the passage of the Private Higher Education Act and other laws mentioned above, certain other laws were made to compliment these laws. Among these laws are National Higher Education Fund Board Act of 1997. As a result of this enactment, in 2001 six private universities and three branch campuses of foreign universities were to offer full degree courses. The establishment of the six local private universities was intended to provide courses in engineering, business studies, medicine and multimedia (Government of Malaysia, 2001:109).

With respect to funding, understanding the fact that there could be shortfall of finance of this new policy, the local private universities are financed by large Malaysian Corporations. For example, Universiti Multimedia came into being and being funded by the Telekom Malaysia (TM), the largest Telephone Company in Malaysia. The same tempo led to the creation of some other Universities like Universiti Tenaga Nasional which is due to the investment by Tenaga Nasional, the National Power Company. The government has a Golden Share in these two privatized utilities and hence the formation of private universities is consistent with the Malaysia Incorporated concept introduced by the Malaysian Government in 1983. One other task of the branch campuses of the foreign universities is to partner with the large Malaysian conglomerates such as Sunway Berhad in the case of Monash University and Barlow-Boustead, the YTL Corporation and Lembaga Tabung Antara Tentera (LTAT) in the case of the University of Nottingham. This arrangement is done by the Malaysian government in order to develop the education sector as well as making the education and industry to be exported to other places (Government of Malaysia 1993: 222).

In the period 1995 to 2005, there was a sharp increase in the number private higher institutions. This was as a result of the demand from the public to the government that the rules governing the award of license to private universities be relaxed which was then done by the government providing financial incentives in the 1995/1996 Federal Budget (Kanapathy, 2003). The tax incentives included tax exemption on import duties, sales taxes and excise duties on educational materials; a 100% Investment Tax Allowance for investments in technical and vocational institutions and tax deductions to corporations that make cash donations to government and semi-government institutions of higher learning (ibid). According to Ong and Nordin, (2003), the economic crisis of the 1997 which affected almost al the countries of the world including Malaysia indirectly changed government or at best assisted in changing government policy in this direction. The liberalization in this sector was further reinforced to allow everyone to participate in the education business which then brought about dramatic growth in the economy. As a result, a total of 26 colleges were granted the approval to conduct 3+0 degree programmes in collaboration with some selected foreign universities (Tan, 2002) to help to reduce the flow of foreign exchange due to overseas study by Malaysians. The twinning programmes especially 3+0 programmes offered jointly with the foreign partners have unquestionably elevated the status of private institutions. They were to enroll their children in courses not only recognized by government but also internationally and English language be used as the acceptable medium of communication. However, it cannot be seen to be a surprise that even non-English speaking international students decide to pursue their studies in private universities. It is not surprising also to learn that non-English speaking foreign students choose the private higher education institutions to further their studies. The 3+0 programmes have made private institutions equal partners in providing excellent quality of tertiary education. According to Arokiasamy, et al, (2009) prior to this, private institutions were seen as agents for foreign universities and professional bodies and mainly catering for students who could not get a place in public universities or those who wanted to study overseas. Many do not realize that this arrangement is only valid for five year and subject to review by the ministry.

Notwithstanding the success that might be seen here, critics however are quick to highlight that most of these 3+0 foreign partners are from the lower categories especially newly upgraded universities in UK and Australia. In the same vein, as reveal in the government guide, reputable UK and Australian universities were invited to establish branch campuses in Malaysia in 1998. This gave rise to the structural change of the private ownership of private universities in Malaysia. These structural changes in private higher education include the corporate ownership of institutions and the public listing of some PHEI in the KL Stock Exchange (Education Guide, 2003).

For anything it takes, one thing is not in doubt and that is the impact of higher education liberalization in the Malaysia education sector. It is well received and greeted with enthusiasm by all races, particularly the non-Bumiputra, signifying the government’s intention to provide higher education to the mass irrespective of race and colour. As Ong and Nordin, (2002) puts it, this has successfully removed a hot issue among the non-Bumiputra since the implementation of New Economic Policy in 1970. However, the current data available has shown that, there are over 500 various PHEI offering myriad of programmes. The sudden and unanticipated change in the private higher educational landscape inevitably is either a blessing in disguise or a curse to PHEI. In the same vein, in the opinion of Hashim, et al (2009), “undeniably today, the status of private higher education has been elevated and accepted as on par with the public tertiary education, if not better”. Though, this statement is contentious, notwithstanding, the roles of PHEI have become weighty given their leading roles in both the “democratization” and internationalization of Malaysian higher education. In tandem with the government’s plan to increase the higher education, participation rate among the 17-23 age cohorts to 40 percent by 2010. This is to justify that the PHEI play a significant role in the “democratization” of higher education in Malaysia. The primary evidence of this is the increasing number of students that are enrolling in private universities as well as the setting up of new universities by private entities. In determining the effect of Business process reengineering on higher education development, Hartini, et al (2007) submit that there are several factors that are responsible for the implementation of BPR success. These factors according to Hartini are teamwork and quality culture, quality management system and satisfactory rewards, effective change management, less bureaucratic and participative, information technology/information system, effective project management and adequate financial resources.

In general, it is necessary to distinguish between the public university and private university. According to Selvaratnam (1992), the public universities are those that are fully controlled and funded directly by the federal government and indirectly by the public sector. Private University on the hand are those that are owned, controlled and managed by private individual who are ordinary members of the public. Currently, there are twenty (20) public universities in Malaysia, established between 1962 and 2007. All these universities are offering programs of various disciplines, scie

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