Challenges and Opportunities for Small Countries: Funding a World-Class System in a Time of Financial Crisis

Professor Ellen Hazelkorn

Vice President, Research and Enterprise, and Dean of the Graduate Research School

Dublin Institute of Technology, Ireland

I would like to thank the Ministry of Higher Education of Saudi Arabia for inviting me to speak at this important conference.

I was asked to speak about the issue of "Economic Crisis in Higher Education", but I want to broaden out my talk and look, not just the challenges, but also at the opportunities, the lessons to be learned, and the policy directions that different countries have taken. This is because it seems to me many of issues coming forward in the papers today share common themes. On the one hand, higher education has received increasing policy attention due to the realization that investment in higher education can be an important means of stimulating economic development in response to the global financial crisis. If we look around the world, many countries have utilized the crisis to increase their investments in higher education, as means of stimulating growth for the knowledge economy.

In contrast, other governments have adopted very different kind of strategies, primarily because the economic environments in these countries, like Ireland where I come from, have been quite difficult. This is also the experience in Latvia, Iceland and Greece. These countries have adopted very different strategies and certain measures of budget cuts reflecting different economic fundamentals.

Very briefly, I am going to look at some of the transformations that have happened in Europe. I am going to give you the European prospective, looking quickly and briefly at some of the actions that have been taken in European countries. Then, I will comment on the policy and institutional solutions that these four countries have adopted, which I think will provide some interesting lessons for countries here in the Middle East.

Let us briefly look at some of the European trends. On the public funding side, as we know, many countries are suffering large budget deficits, which have led to major cuts in public funding for higher education and other public services. The reduction has affected expenditure on students, which has, in some cases, affected teaching. Tuition fees have risen and in some instances have hit the ceiling, dramatically affecting students' ability to pay; some observers claim that higher education may be the next bubble to explode because of the continuing rise in tuition costs. On the students side, we see an increase in demand from students, as students' chances in the labor market have decreased; this has led to greater demand for both undergraduate and graduate education, so students numbers overall have increased.

The crisis has also affected the pattern of students' mobility. Students who might previously have gone to private institutions are now choosing to study at public schools. Those who intended to study internationally are now studying domestically. On the academic level, there has been shrinkage in faculty recruitment and changes to academic contracts, and this has influenced the mobility of top talent – encouraging some top academics to look for employment in different countries.

Many of these issues are not new. This is really my point. The global financial crisis simply highlighted underlying trends which were already becoming apparent.

Here is a map to illustrate where the different countries are situated in Europe. I have taken Ireland, Latvia, Iceland and Greece as examples because they share similar sets of problems. Broadly speaking, the policymakers are seeking to address a range of questions affecting their higher education system:

• How should the human resources and management of higher education be mobilized to provide the best response to national needs?

• How should the national funds for R&D be strategically oriented to stimulate innovation in the short term and in the long term knowledge-based growth and the competitiveness of the economy in the future?

• How could the institutional environment for education, research, technological development and innovation be improved either through organizational adjustments or better coordination?

I am now going to provide a brief overview of each country, using two slides for each country.

Ireland has 4 million people, 7 universities, 14 institutes of technology, plus other higher education institutions. During the Celtic Tiger years, which was between 1998 to 2008, the core budget for higher education rose year after year (cumulatively 31%); almost €2.8 billion was invested in research and higher education infrastructure. But since 2008, higher education has experienced a cumulative decrease in exchequer funding of 22% bringing it below the 2005 figure. At the same time, there has been a 13% increase in total student numbers. So, resources per student have declined from approximately €10,732 to less than €3,000 per student. There have also been restrictions introduced on the total academic staff numbers, salaries have been reduced by an average of 5% - 8%, and all new appointments are now required to be offered at starting salaries 10% lower than previously.

The Irish government established a taskforce which produced the National Strategy for Higher Education to 2030 (2011). It recommended:

• Strong focus on strategic priorities, mission differentiation and excellence aligned to fields of institutional expertise and competence;

• Mergers, rationalisation and greater efficiency through shared services;

• Regional clustering of different types of HEIs;

• Growing attention to attributes/benefits of the HE system;

• Structural change in HE: pedagogy, provision of services

• Focus on assessment, international benchmarking, value-for-money.

New educational and re-training schemes have also been introduced for the unemployed.

Iceland is also a small country, with 7 universities, 4 of which are state-owned. Prior to crisis, Iceland had invested the most money in primary, secondary and post-secondary non-tertiary education as a per cent of GDP (approx. 5.3%); however, investment in tertiary education remained below the OECD average. The financial crisis has resulted in reductions in education expenditure, with a 10% cut in secondary and 15% cut in university spending since 2008.

In response, the Icelandic government undertook a review of higher education: Education, Research and Innovation policy: A new direction for Iceland (2009). It has encouraged greater mission differentiation between institutions and emphasized excellence aligned to fields of institutional expertise and competence. The government taskforce of international experts recommended:

• • Merging all 7 universities to form just two: 1 public and 1 private;

  • One large umbrella of governance system;

  • Closer integration of public research institutes with universities.

• Minor changes to curriculum, such as merging distance and traditional format in the same program;

  • Most changes have occurred because of across-the-board budget reductions.

The situation in Latvia is somewhat different because it was hit very hard and early by the financial crisis. After joining the EU, university budgets had increased 400% between 2002-2009, from €24m - €99m. However, since 2009, university budgets have been reduced by 66%, and are now back to 2006 levels (€43m). Academic salaries were reduced by up to 30%. As for students, there have been direct cuts in funding per student, from €4,999 (2009) to €2,224 (2011), and a decline in purchasing power, which has led to a fall in number of students with the ability to pay tuition fees; this is especially acute for part time students. State-funded students have been largely unaffected until 2011.

The Latvian government has been influenced by two different reports: Structural Reforms Needed in Higher Education and Science to Enhance the International Competitiveness of Latvia, and the Action plan for structural reforms in HE and Research in 2010-2012. Their strategy can be summarized by four major actions:

1. Improving quality through reducing public colleges, from 18 to 14, through merger with universities, and evaluating all study programs to avoid duplication.

2. Increasing responsibility, the effective use of resources, introducing performance-based funding, and taking quality criteria into account when allocating resources;

3. Increasing international competitiveness;

4. Ensuring greater integration between higher education and the national economy.

Greece has 40 public universities, 25 of which are technological educational institutions. Funding for higher education institutions was reduced by 23% in 2010 and 25% in 2011. As for university staff, salaries have been reduced, and 800 academics were unable to undertake duties due to lack of funds. The Ministry of Finance has decided not to pay the operating expenses of universities which have not submitted financial statements/reports, while publishers are unwilling to supply university textbooks (customarily paid by the state), because the government owes €30 million since 2005 and there are no prospects the money will be paid.

The Greek government also undertook a review of the higher education system; the National Strategy for Higher Education (2010) recommended the following actions:

• Reducing the number of higher education institutions which are 4 times the European average (per million inhabitants) and reducing the number of departments (500 today);

• Reducing the number of Postgraduate Programs (600 today), most of which have never been evaluated;

• Introducing a new governance structure, with an Institution Council to undertake the administrative responsibilities, while academic issues are decided by Rectors/the Academic Senate.

• Public funding to be based on evaluation results and performance;

• Student work to be closely monitored to ensure better completion rates– which is likely to reduce the total number of students.

Since higher education is key to sustainable social and economic growth, the global crisis presents challenges but also opportunities to introduce new thinking and ways of doing things. The types of actions being taken by these four countries are typical of similar reforms being introduced in many other countries. Notably, each of the countries undertook a review of their system, which was then used to introduce reforms. The actions tend to fall into two categories:

1. Higher Education System level actions:

• Significant restructuring and increased regulation of higher education system to be more competitive;

• Greater emphasis on quality and value-for-money, and measuring performance through regular audits and use of global rankings;

• Maintaining or increasing research funding for STEM (science, technology, engineering and maths) subjects, and improving output and impact of scientific activities;

• Improving students and educational quality through evaluation of study programmes, better student retention and progression, and faster completion rates;

• Introducing a new funding model for higher education, usually through student financial contribution, and linking resource allocation to performance.

1. Institutional level actions:

• Strategically focusing on encouraging differentiated institutional missions which are more focused and competitive;

• Forming alliances with proximate/peer institutions to strengthen capacity. This might include sharing services, e.g. procurement, IT support, e-library facilities, student accommodation, etc;

• Identifying new opportunities by more closely aligning curriculum to key sectors of society and the economy;

• Adopting new pedagogical practices to better respond to the changing student population and needs;

• Amending academic contracts to include greater focus on performance and productivity;

• Developing a new business model and professionalise service-provision.

Small (or rather less wealthy) nations face particular challenges when seeking to build a world class system – but they can also be quicker to adapt and change. By adopting a ‘whole of country strategy’, these countries provide important lessons for other countries. This strategy involves three key elements:

1. Strategically and regionally clustering research and teaching to maximise capability beyond individual capacity;

2. Focusing on enabling more higher education institutions to achieve some form of unique global leadership across teaching, research and doctoral training;

3. Adopting a single brand approach to enhance global competitiveness, e.g. ‘brand Ireland’.

Thank you,