FDI and false hopes

Print edition : December 01, 2006

Prof. M. Anandakrishnan was Vice-Chancellor of Anna University from 1990 to 1996. - V. GANESAN

Interview with M. Anandakrishnan, Chairman, IIT, Kanpur, and Chairperson, Madras Institute of Development Studies.

A CONSULTATION paper, titled "Higher Education in India and GATS: An Opportunity", circulated by the Department of Commerce of the Union Government has raised serious concerns over the wisdom of allowing foreign direct investment (FDI) in the higher education sector. Will FDI help meet the challenges of this crucial field? Opinion differs among academics, educational experts and political parties. Noted academic and educational administrator M. Anandakrishnan, in an interview to Frontline, did not agree with the FDI advocates' perception that it would help meet the growing demand for higher education.

Anandakrishnan, who is at present Chairperson of the MIDS and Chairman of Indian Institute of Technology, Kanpur, said that the hopes built on FDI were only "a misleading mirage that disregards reality". According to him, in the past 10 years many foreign institutions have been exploiting the craze for foreign education. The only thing that has happened is the entry of some "second-tier and third-tier" institutions, which attempted to sell their programmes, many of which had not even been accredited in their own countries. Reputed foreign institutions, in his view, are mostly interested in collaborating with their counterparts, particularly in research.

Excerpts from the interview:

As one closely connected with higher education, particularly professional education, in several capacities, how would you describe the present Indian scene?

The higher education system has been growing at a very rapid pace. Today, we have as many as 357 universities in India, out of which 20 are Central universities that are of a very high calibre. And there are 13 institutions of national importance such as the Indian Institutes of Technology, which are now rated as world-class institutions. And there are 217 State universities, at least about 30 per cent of which are of a very high standard. Then there are 102 deemed universities, in both private and public sectors, and at least 50 of them can be described as outstanding. Now, if you look at colleges, we have close to 17,625 colleges in a variety of disciplines such as science, commerce, management, engineering, medicine and agriculture. We have institutions in almost every field.

Do you think that the Union Commerce Ministry's paper on Trade in Education Services presents the situation in the right perspective?

In spite of very robust growth, we have not been able to meet the escalating demand for higher education. This is because the enrolment in secondary schools is growing, and there are [many] first generation learners wanting higher education. People look upon higher education as a means of upward social mobility and also economic security. We are not able to provide higher education facilities to all aspiring students. In most of them the skill components are missing. To that extent the study by the Ministry of Commerce is factual. It has to be noted that the private sector has dominated the growth in the number of higher educational institutions in the last 10 years. For instance, nearly 92 per cent of the professional institutions are in the private sector. The government has in the last 10 years almost abandoned the higher education system to the private sector. So, the growth rate of government institutions in the last five years has only been around 5 per cent against the private sector's 75 per cent. Higher education is still not accessible to all aspirants. However, the prognosis of the growth prospects is not correctly reflected in this paper.

Do you agree with the perception that FDI is the only way to set things right? Is "a solution from within" not possible?

Even now foreign institutions can come to this country through what is called "the automatic route" under the rules framed by the Foreign Investment Promotion Board. However, in the last 10 years, though about 150 foreign programmes are being offered in India, not one of the foreign institutions has invested any money in this country. Most of them have been offering what are called "twinning programmes", studying partly in India and partly abroad, or are "franchising" their degree programmes for hefty fees, without proper supervision and quality monitoring. So, to expect foreign institutions to invest money in India in future is wishful thinking.

Now, let us look at the kind of investors who are likely to participate in our higher education system. The top-tier institutions such as MIT [Massachusetts Institute of Technology], Harvard University, Stanford, Yale and Princeton will only be interested in collaborating with some of India's outstanding institutions in research and development, for faculty exchange, in conducting summer schools, and so on. They will not be interested in offering their degree programmes in India. Even if they do, they would only do so [in collaboration] with public sector institutions of excellence in India. Only the second- or third-tier institutions abroad may intend setting up shop in this country. First, these institutions will only be interested in enrolling students for their own campuses back home. However, after finding out that most Indians will not be able to afford this, they may like to operate their programmes in this country. About 150 such programmes are being offered, with an estimated enrolment of about 15,000 students. No precise data are available since no agency is responsible for monitoring the nature and quality of these programmes.

But if you look at the 150-odd programmes that have been offered by foreign institutions in the last 10 years, they are, first of all, as I said earlier, being offered by second- or third-tier institutions and their motive is only commercial; they have not established any campuses of their own in this country. These institutions have only tied up with private Indian institutions for commercial motives and, that too, not with the best institutions in this country.

An unfortunate aspect of their functioning is that many of the programmes that these institutions offer in India have not even been accredited in their own countries. A survey found that 44 of these 150 programmes were unaccredited and unrecognised in their own countries. These institutions have only capitalised on the gullibility of students in this country and their craze for foreign degrees.

There was one single instance of a foreign investor coming to this country. The investor was a United States-based private commercial institution, Sylvan Institute, which came to offer higher education programmes in Hyderabad. The Institute had an office in Malaysia, and it offered this programme from there. It soon folded up, leaving students, faculty and everybody in the lurch. It was a disaster.

Two other institutions, which can be described as top-tier institutions, also came in through their commercial wings. One was the Carnegie Mellon University, Pittsburgh, and, the other, the Illinois Institute of Technology, Chicago, which offered post-graduate engineering degree programmes. These were also failures, because the fees were very heavy. So, to expect an FDI flow into this country is "a misleading mirage". Even if we assume that an FDI flow will take place, my own assessment is that it will only be a conduit for laundering the hundreds of crores of rupees earned as black money by private educational institutions in this country.

In case foreign investors are keen on entering the field of higher education in India, what will be their contribution? To what extent will they respect and act in conformity with the national aspirations, needs and the ground reality in this country?

Even in the very unlikely event of foreign investors [in education] coming to this country in the real sense, they will not be interested in offering programmes that are of particular relevance to this country or that have cultural contexts.

For instance, they would not be interested in any effort to develop regional languages. Yet, these institutions would seek equal treatment with Indian institutions. In India, formal education is considered a charitable endeavour. Many of our private institutions are treated as charitable institutions although in reality they operate as "for profit" institutions. Now under GATS [General Agreement on Trades in Services] rules, there is a provision called "national treatment", which means that you should treat a foreign investor in this country in the same way that you treat his Indian counterpart. Now we treat our institutions as charitable institutions. The foreign investors will also demand the same status as tax-exempted charitable institutions for the institutions they start.

At the same time, just as our private institutions do not want any regulation on admissions or fixing of a fee structure, the foreign investors will also demand: "You [the government] cannot interfere in our fee structure or in our admission policies." For instance, they would not be interested in providing reservation.

If you think that these investors would fulfil the needs of the disadvantaged and underprivileged sections in this country, it will not happen. So, any encouragement for foreign institutions to open their campuses in this country will only be contributing to the further widening of the gap between the rich and the poor, the rural and the urban. On top of it all, they would siphon off good faculty members by attracting them with higher salaries and other benefits, from even some of the best institutions in this country. They would transfer vast amount of profits from India with little or no investment and with no real contribution towards our needs for knowledge and skills.

In India, the government has already abandoned higher education to the private sector. Now if the country throws open the field for FDI and if foreign institutions respond, that would only provide an additional excuse for it [the government] further to give up interest in higher education. "Oh, we have provided so many foreign institutions offering [higher education]. Why don't you go there?" This is like asking people who are crying for rice: "Why don't you eat cake?" So, this is the danger implicit in the proposal.

At a "global education and training exhibition" held in Hyderabad, in which more than 48 universities from 12 countries took part. Many foreign institutions have been exploiting the Indian craze for foreign education.-MOHAMMED YOUSUF

They always throw the blame on what they call "paucity of resources".

I do not believe that the resource position is a matter of serious concern in this country in respect of higher education. If the government really fulfils its [promise of providing] 6 per cent of its GDP for education, out of which 1 per cent will be for higher education and 0.5 per cent for professional education, as suggested by one of the committees of CABE [Central Advisory Board for Education] a few months back, there will be plenty of money to start first-rate institutions without the [help of the] private sector. And if it has a policy of providing sufficient encouragement and incentives to philanthropic organisations and to corporate bodies [interested in this], there will be enough money to start higher educational institutions without depending on foreign investors.

What is the experience of other countries in respect of FDI?

The Commerce Ministry paper also talks about the practices in foreign countries that have been permitting FDI in higher education. Unfortunately, the assessment is somewhat misleading and oversimplified. For instance, out of the 150-odd higher educational institutions in the United Kingdom, only four are foreign (American) universities. As a special case, they have allowed these four foreign universities to operate as for-profit institutions and not as charitable institutions. And there is only one national private university there operating as a philanthropic institution. All the others are public-funded. The U.K. regulations disallow private universities in that country.

In Malaysia a very peculiar situation prevails. Because of its Bhoomiputra policy, its government does not encourage the Chinese and other non-Malays to have the same kind of educational opportunities as Malays. So they have opened up the field to enable the private sector and also foreign institutions to operate in their country mainly to meet the needs of non-Malay ethnic groups. They do not offer any high-level programmes.

In China, there is a very strict regulation against foreigners starting operations. NIIT is operating [in China], but it is not offering a formal degree programme. It offers commercial, technical, skill-oriented and trade-oriented programmes, just as in India. In Singapore, only a very limited number of world-class institutions have been allowed to start their programmes. It has very rigid control on who can offer higher education programmes. And that too not for the Singaporeans, who are taken care of by the government and their own universities. Singapore only wants to be a location for top-class institutions to attract foreigners to come and study there.

Only world-class institutions may enter Singapore. Many foreign institutions have responded. For instance, MIT is offering a joint programme with the National University of Singapore. Out of some 120 universities in Australia only one, the University of New South Wales, was permitted to establish a campus in Singapore by bringing investment, by bringing in real money. But they will be offering their programmes for Indians, Malaysians, Indonesians, and so on, and not for the citizens of Singapore. In other words, Singapore wants to make itself an educational destination for foreigners to come and study there and, that too, only in world-class universities, rather than to go to Australia or the United States for higher studies. So, there is very rigid monitoring, control, accreditation, and so on.

Even in a country like Indonesia, any programme [foreign] universities offer should be accredited [by the governments] both in their own countries and the country in which they propose to offer their programme. India is one country where anybody can come and advertise all kinds of degrees. In fact, there have been plenty of offers from what the Americans call the "diploma and degree mills". By this they mean that these are not legal entities and their degrees are worthless.

Their curricula are not up to any standard, and these people give full-page advertisements in newspapers in other countries and offer attractive degrees and programmes, often programmes not accredited in their own country. When such advertisements are published, many students get roped in, and unfortunately, in India there is no authority or no legal machinery that requires these people [the foreign educational institutions] to register or get the permission of someone before they enrol students. Some enrol students, offer programmes and then suddenly fold up and go away. There is no protection for students. This has happened. Many of these persons have been prosecuted in the U.S. This shows the total absence of a monitoring mechanism in India.

If the entry of foreign capital is inevitable, in what ways can the government safeguard national interests?

The government should monitor the quality of the programmes, verify the credentials of the investor-institutions, and have a watch over newspaper advertisements by these institutions. And even if the government wants to allow FDI, it should make sure that what comes in is real money and that the programmes offered are in accordance with the priorities in this country. It should also ensure that they follow the national policies in terms of equity, affordability and access. All these things should be taken care of through detailed guidelines and enforceable regulations. Otherwise, if the proposal for FDI in higher education blindly throws open the higher education sector to anybody and everybody, with no monitoring and control mechanism, it will be a grave mistake.

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