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.
Reference
1. Geoffrey Williams, Private universities
facing major financial crisis, need help, Free Malaysia Today, 2 Dec 2018
3. Wong Chun Wai, How about stimulus plan
for education business? The Star, 7 Apr 2020
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