Investing in education hubs – Local support is key

GCTCBy Jane Knight

International education hubs are the latest development in the international higher education landscape. A country-level education hub is a planned effort to build a critical mass of local and international actors – higher education institutions and providers, students, research and development centres and knowledge industries – who work collaboratively on education, training, and knowledge production and innovation.  To date, six countries – Qatar, United Arab Emirates, Singapore, Malaysia, Hong Kong and Botswana – claim to be education hubs. But how are they financed? Are the investors public or private? Are they local or foreign based? Are the current funding models sustainable? These are important questions worthy of closer examination.

Qatar

Each country has its own capacity and strategies to fund education hub initiatives. Qatar is an interesting but unique model.

All physical infrastructure and facilities are provided for foreign branch campuses and companies located in Education City and the Science and Technology Park. Furthermore, 100% of the sizable operating costs for the 10 branch campuses and the new graduate-level Hamad bin Khalifa University are covered by the Qatar Foundation.

The annual operating costs to support Education City, the Science and Technology Park and the extensive array of research programmes and grants are the responsibility of the Qatar government and are extremely high. Is this government-supported full funding model sustainable and is it optimal?

In essence, Qatar is importing and purchasing the majority of education programmes, services and research for the education hub activities.

A pivotal question is how long should a country attempt to build and strengthen domestic capacity by purchasing and importing foreign expertise. It has been 17 years since Qatar first started its work on inviting select foreign universities to establish specific programmes in Education City.

Is this the first phase of Qatar’s long-term plan to develop more domestic human resource capacity as it loosens its reliance on natural gas and foreign expatriate talent or is this becoming its modus operandi? If so, is it a sustainable and effective model? If not, what will be the second phase?

United Arab Emirates

The United Arab Emirates, or UAE, offers a completely different set of circumstances in terms of funding, investments and revenue generation. Each emirate has developed its own approach to making UAE an education hub.

Abu Dhabi has invited world-renowned institutions, such as New York University and the Sorbonne, to set up branch campuses in customised facilities provided by the Abu Dhabi government.

In addition, the Massachusetts Institute of Technology was invited to help develop and advise on the development of the Masdar Institute of Science and Technology and Masdar City, the first carbon-free zone in the world.

Masdar City hosts world-class research facilities, scientists and graduate programmes – all of which are supported by the Abu Dhabi government. This represents an enormous domestic public investment.

Dubai

Dubai is a different story. Dubai’s Strategic Plan called for the establishment of several theme-based economic free zones. Two of these are education focused – Knowledge Village and Dubai International Academic City.

The investment arm of the Dubai government, TECOM, is mandated to build the physical infrastructure and facilities for these zones and recruit reputable foreign institutions and training companies. The tenants in the zones enjoy attractive tax and regulatory incentives to offer their education and training programmes.

Unlike the situation in Qatar and Abu Dhabi, the foreign institutions and providers do not have their operating costs subsidised and they pay rent for the use of facilities. It is estimated that in Dubai’s two economic free education zones, the public domestic investment is about 80% in terms of land, infrastructure and services, and private foreign investment from the tenants is about 20%.

The amount of revenue generated from facility rentals for TECOM and from tuition fees for branch campuses and private training companies is not available.

But, given that these zones are relatively stable and operating at full capacity, the funding formula seems to be working, and increased education opportunities are being offered to primarily expatriate students living in UAE (60% of enrolments), international offshore students (32%) and some UAE citizens (8%).

Hong Kong, Botswana and Singapore

Hong Kong presents yet another scenario. The government has made limited public investment into hub development since its first announcement in 2004. The primary public investment by Hong Kong has been in the form of scholarships to attract international students, most of them from China.

Recently, a plot of land was made available to attract branch campuses of local or international universities; but there is not information as to whether facilities will be built and available for rent or whether institutions would have to invest in building their own infrastructure.

Similarly, the public investment of the Botswana government, beyond engaging in a sophisticated planning and consultation process for hub development, appears to be limited.

Botswana hub plans are still on track, but have been negatively impacted by the 2008 to 2012 economic crisis. Their investment to date has been scholarships for international students and the establishment of a new university – Botswana International University of Science and Technology.

The financial investments in Singapore’s hub building activities since 1998 are impossible to track due to the lack of any published information on public/private or domestic/foreign funding sources.

No conclusions can be drawn, but worth noting is that the Singapore government has been referred to as the ‘venture capitalist’ in terms of its significant and generous role in bankrolling the education hub efforts.

Malaysia

The situation in Malaysia is complex, given the number of different components to the hub strategy. Malaysia is home to seven branch campuses and more are planned. Both private foreign and domestic funds were used to fund these initiatives.

Yet, with the establishment of an economic free zone in the form of EduCity Iskandar, there has been major financing provided by the public investment arm of the government, Khazanah Nasional. It has funded the building of infrastructure and education facilities to attract international institutions.

Overall in Malaysia, it is estimated that public domestic investment represents 50% of the funding for education hub activities, complemented by 40% of domestic private investment. The remaining 10% is made up of foreign private investment and other sources.

Conclusion

These case studies demonstrate that public domestic investment is critical to the development of education hubs. While hub building also requires private investment from domestic and foreign sources, the importance of local government support to kick-start and leverage other sources of financing should not be underestimated.

The UAE and Malaysia are examples where initial public investment has paid off and attracted other streams of private funding.

Singapore and Qatar present other models where financing of education hub activities has been done primarily by the government (or ruling family) and over the last 15 years much has been accomplished. However, the sustainability of such funding and the ability to replicate this model in other nations remain as two unanswered questions.

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