Source: The Star
Private higher education institutions (HEIs) account for almost half of the student and academic population and absorb large sums of government subsidised loans through the PTPTN loan system. In 2016, PTPTN allocated RM2.6 billion or 60% of its funds to private HEIs which made up around half of the revenue for the sector.
The lack of attention to private HEIs is not a new issue. Geoffrey Williams and his team from ELM Graduate School at HELP University did a research in 2018 which showed that private universities are struggling and need help.
The majority of private HEIs are loss-making with 53% making losses before tax and 55% making losses after tax. The proportion making losses has risen from 41% before 2013 to 55% after 2013. Even for those that are profitable, times are tough. Average profits before tax fell 54% and profits after tax fell 78% since 2010.
Around 44 percent are financially insolvent. And debt levels continuously increase for these institutions to survive. In 2018, 64 percent were in dire debt distress with current and fixed assets less than balance sheet debt, thereby eroding shareholder value.
Williams undertook a sensitivity analysis on private higher-educational institution finances and found that a 5 percent drop in revenue would turn 70 percent of Malaysia’s private higher education institutions into money-losing entities. A 10 percent loss of income would mean all Malaysian foreign branch campuses will operate in the red. With a 15 percent drop, more than half of Malaysia’s private higher education institutions would be insolvent.
What’s worse, the Covid-19 pandemic is now exacerbating the bleak outlook for HEIs that are already in trouble. Private institutions rely on receiving income twice a year. However, with the majority of international students out of the country and not knowing when they can or will return, incoming revenue is likely to be very low. The present cash flow challenges are far beyond what has been faced before. Many institutions don’t have any unencumbered assets as security for further loans, so they will have to rely on shareholders advances, or government emergency grants to survive. The latter would be improbable.
Private HEIs have already laid off the majority of their part-time teaching staff and fulltime staff on zero-hour contracts. Balance sheets are extremely fragile, with many are unable to pay trade creditors. The situation with small independent vocational colleges is more dire. With rents to pay, and no students especially with MCO survival is unlikely. This lockdown has come into effect during the peak of a recruitment season, which is particularly focused on local students, post SPM and STPM.
For those who are heavily dependent on recruiting international students, the impact is even greater. Foreign students who are sponsored or under scholarships are not sure if their sponsorship or scholarships will continue post Covid-19. Travel and/or visa restrictions imposed by their respective countries or by our authorities are also factors to be considered.
Large institutions do see staff as an asset rather than an expense and nurture their career paths. Curriculum, pedagogy, and classroom standards now require a completely new approach with the pandemic. In one of Star’s articles (7 April 2020), Wong Chun Wai also claimed that some government officials still do not understand that the private education sector could be a revenue-earner. It has created many jobs.
Datuk Parmjit Singh, who heads the Malaysian Association of Private Colleges and Universities, has appealed to the government to introduce a stimulus package that would help the industry attract international students as soon as travel restrictions are lifted. This must include the immediate revamp of the Education Ministry’s Global Services and a review of the eligibility criteria for incentives and facilitation provided by the Malaysia External Trade Development Corp. Malaysia also needs to make itself more attractive to international students. It would be helpful if the government plays less of a regulator but more an enabler of this business.
1. Geoffrey Williams, Private universities facing major financial crisis, need help, Free Malaysia Today, 2 Dec 2018
2. Murray Hunter, The Collapse of Malaysian Private Universities www.asiasentinel.com/
3. Wong Chun Wai, How about stimulus plan for education business? The Star, 7 Apr 2020