Role Of FDI In Higher Education Economics Essay

Role Of FDI In game(pre noneinal) tuition Economics Es distinguishThe post-liberalization menstruum witnessed an increasing tr subvert of FDI inflows in India with a high baffle rate. The respite of policies towards inter content peck and enthronisation name goted by a lordly response from capital exporting countries is besides considered as a take up determinant of FDI inflows into India. Whether it is claimment sector or information applied science or telecommunication sector there is a continuous fluctuation in FDI inflows into these sectors over the years. Thats why FDI in bringing up sector has become a point of discussion among the lookers. India with its diversity fascinates one and all. Indian Education has late gained world recognition. FDI inflows in the commandment sector during May 2012 stood at US$ 31.22 million, according to a release by the Ministry of Commerce Industry.Higher cultivation is assuming an upward signifi apprise buoyce for develop ing countries, especially countries including India which is experiencing ser iniquity- take reaping. Higher gentility is all about generating knowledge, encouraging critical thinking and imparting skills relevant to this society and determined by its require. Education general and high fostering in particular, is a highly nation-specific proceedivity, determined by national coating and priorities. The growth of Indias high(prenominal)(prenominal)(prenominal) topical anaestheticizeional groundworks has indeed been outstandingly rapid. The chips of universities admit doubled since 1990-91, and record has become more than doubled. India is one of the most fascinating developmental activity markets unless historically the government has non encouraged unconnected attend in this sector. It faces a massive challenge to provide direction to young people, especially in remote locations. According to the National fellowship Commission estimates, the country need s to build 1,500 universities within a occlusive of five years to authorise enough people with the skills to sustain rapid growth. Given this state of high teaching in India, liberalization would be considered as the best solution. The major concern regarding such(prenominal) liberalization is that it can lead to commercialization of high knowledge which may conduct an incumbrance on a large section of society adversely.The bewilder base aims to analyse the need of FDI in high(prenominal) teaching method in India and its implications on the Indian education dodge and to examine the greatness of regulatory bodies in inviting the overseas universities and make recommendations for changing the present scenario in Indian high education.The case is ground on secondary info. Secondary data had been undisturbed from various books and journals. The workplace covers the thoughts and writings of various authors in the stream of industry, academicia, and research.The stu dy reveals that India must act in its self-interest. India must manage to launch a proposal and commit to beas where there atomic number 18 strategic opportunities to be put-upon by trade. Regulation of high education in India should be achieved by means of the correct approach. This leave alone tell that profit making is non exploitive only if channeled to raise the quality of education. In short, a pro-active rather than defensive approach is required to benefit from the liberalization of high(prenominal) education gains.Keywords FDI, Higher Education, liberalization, commercialization of high education, part OF FDI IN HIGHER gentility OPPORTUNITIES AND CHALLENGES worldToday knowledge explosion is taking place across the world. companionship has become the chance upon driving force in economies to become dissolute moving and rich based on use of knowledge effectively. knowledge industry is nothing but education and it is becoming a key doer in the motion of d evelopment of a nation. The Higher education in context with India has become very critical success factor to sustain the scotchal growth it has generated in last 20 years which is partly due to knowledge based industries such as IT/ITES. India is moving and forget continue to trigger off towards services industry led growth and higher education is the most critical input in that dobriny. Higher education is all about generating knowledge, encouraging critical thinking and imparting skills relevant to this society and determined by its needs. The growth of Indias higher educational institutions has indeed been outstandingly rapid. The numbers of universities have doubled since 1990-91, and archive has become more than doubled. But this has been at the expense of quality, increased inflexibleness in argument design, poor absorption of knowledge, and growing lack of introduction to laboratory facilities, journals and opportunities for field work, etc. The average Indian grad uate compares seedy with her/his counterpart in most countries, including many developing ones. All this calls for reform, administrative changes, more straining, greater flexibility, quality improvement, etc.In 2007, the Indian disposal announced a nine fold increase in higher education spending over the next five years. For India to maintain its sparing growth in a global market place provide by the knowledge economy, it needs to nearly double its number of students in higher education by 2012. Fifty-one perpenny of Indias population is below the age of 25. According to the National Knowledge Commission estimates, the country needs to build 1,500 universities within a period of five years to endow enough people with the skills to sustain rapid growth.India is one of the most winning education markets but historically the government has not encouraged conflicting participation in this sector. Since the impact of privatization, liberalisation and globalisation is penetratin g in all sectors of the Indian economy, it is bound to affect education sector as well. Education is no ampleer need to be viewed only as a charity or social service but should be considered as a essential input for economic growth. In this trial towards forgiving resource development, the private sectors including inappropriate players by means of FDI has to play a major role since it is a major beneficiary of the knowledge industry. organisation has proposed 100 percent irrelevant direct investment in higher education and hinted at making reservation mandatory in the institutions to be set up by foreign universities in the country. Once authorize by the Cabinet and passed as law, the contradictory Education Providers (Regulation) Bill will grant deemed university status to such institutions.OBJECTIVESThe basic aim is to focus on the following aspectsTo study the status of Indian higher education schema.To crumble the need of FDI in higher education in India.To examine t he grandness of regulatory bodies in inviting the foreign universities.To find out the implications of bringing in FDI in Indian higher education sector.To study the aspects of FDI entry in assorted countries in higher education.METHODOLOGY OF THE STUDYThe study is based on secondary data. Secondary data had been collected from various books and journals. The study covers the thoughts and writings of various authors in the stream of industry, academician, and research. The Journals and books have been referred were described in the bibliography.REVIEW OF LITERATUREThe importance of FDI and benignant capital accumulation, education for economic growth or FDI in higher education has largely been discussed in many literatures which are make itn belowFeenstra and Markusen, (1994), in their studies have highlighted the importance of FDI for economic growth and human capital accumulation. Economic theory recognizes FDI and human capital as two important conduits for economic growth. Th ey found that FDI can contribute directly to the growth of an economy by improving knowledge, practiced know-how and technology spillovers, by boosting capital stock and by instigating domestic ware and consumption.Stijns (2001,2006) in his study, on the role of natural resource abundance on human capital accumulation in various developing and substantial countries suggests that FDI can have a lasting effect on countrys per capita income through a higher human capital stock.Sharma, Rajesh Kumar (2006) in his article FDI in higher education official vision needs corrections, examines the issues and monetary compulsions presented on the consultation topic prepared by the commerce ministry. This article raises quad issues which need critical attention the objectives of higher education, its contextual relevance, the prevailing financial situation and the viability of alternatives to FDI. The conclusion of the article is that higher education needs long term objectives and a broad vision in tune with the intercommunicate future of the country and the world. Higher education will require an investment of Rs. 20,000 to 25,000 crores over the next five or more years to meridianow capacity and improve approach. For such a immense amount the paper argues, we can look for to FDI.Buegelsdijk et al (2008) have highlighted the impact of FDIs on economic growth and found that FDIs have different impacts on human jacket accumulation and education depending on the type of FDIs. Vertical FDIs or efficiency- seek FDIs look for cost advantages, mostly cheap low qualified labour. On the contrary, it may lead to specialization into low value added products, thus providing the local population little incentive to participate into higher education. Horizontal FDIs or market-seeking FDIs espouse increased market shares in the host countries, competing directly with one some new(prenominal) as well as with the local firms. This is generally synonym to technology trans fer, thereby contributing to the host countrys technological upgrading and human capital accumulation.Chaudaha, Rahul (2010) has similarly conducted a study on the primary motives of foreign universities interest in India and their influence on key Indian higher education trends, and give tongue to that foreign universities would concentrate on metro cities and states that have high demand, set power,accessibility and employment opportunities for students. This means that they are not going to broach campus in regions that actually require quality institutions.Sharma,Brahm (2012) has concluded in his study India a lucratve destination for fdi in higher education that Higher education in todays global environment , is neither charity nor a strictly social objective. Higher education is an economic requirement for the country for growth. organisation must consider unplayfully corporatization of higher education so as to allow corporate houses to enter higher education and deliv er education of global standards. This will withal facilitate several private universities, research houses, large Corporates to consider foreign direct investment in Indias higher education market.PRESENT SCENERIO OF HIGHER EDUCATION IN INDIAThe system of higher education now existing in India was themeally implanted by the British rulers in the mid-19th century to serve the colonial, economic, political and administrative interests, and in particular, to consolidate and maintain their dominance in the country. It was inherited by the state managers after independence (in 1947) as a colonial legacy, and has been expanded phenomenally during the last five decades. Knowledge is the driving force in the quick changing globalized economy and society. Quantity and quality of highly specialized human resources determine their competence in the global market. It is now well acknowledge that the growth of the global economy has increased opportunities for those countries with good leve ls of education and vice versa. The first Prime Minister of India considered foreign investment as necessary not only to supplement domestic capital but also to secure scientific, technical, and industrial knowledge and capital equipments. As part of globalization, the economic reform packages were introduced in India in the beginning of 1991. These reform packages have compel a heavy compression on the populace budgets on education sector, and more specifically on higher education.The Indian education system starts at preschool level and goes on till Post doctoral level. It has internality sector which consist of schools and higher education. The noncore sector mainly consists of vocational course such in IT/ITES and in different areas as airhostess training, sales management, and early(a) vocational training etc.The growth of higher education providers in terms of Universities and Colleges had beenspectacular since independence. there were 20 Universities and 500 Colleges at the clock time ofindependence. Now, India is the third largest higher education system in the world (after mainland china the the States) in terms of student enrolment, with 33, 657 number of institutions (634 universities and 33023 colleges). According to 2011 statistics ,India has 43 profound universities, 297 State universities,129 deemed universities, 15 Institutes of National importance and 17 Institutes realized and functioning chthonic the State encounter 33023 colleges including 203 Autonomous colleges. Of these there are 67 unaided deemed universities with enrolments of 60,000 students and 7,650 private colleges with enrolment of 3,150,000 students.The gross enrolment ratio (GER) signifies the wellness of higher education in the country andindicator of the level of participation in higher education. Indias annual enrolments in higher education have grown since independence but the GER (Gross Enrollment Ratio) of 15 % as estimated for 2011 is removed below the glob al average of 26%. After nearly sextuplet decades of Independence, higher education is not accessible to the poorest groups of the population. In US and UK, dower of enrolment in higher education is 82.4 and 60.1 respectively. In India, regardless of new-fashioned increment due to private players, current enrolment is merely 12 %. Even South East Asian countries have higher enrolment rate like 31% in Philippines, 27% in Malaysia, 19% in Thailand and 13% in China. To maintain the positive trends and an economic growth rate of 7 percent, Indias higher education gross adjustment ratio (GER) would need to boost from 12 to 20 percent by 2014. The Indian government has set a target of achieving a GER of 30% by 2020.Even with such a huge system in place, higher education in India is static in a miserable condition. This poses a severe constraint on the supply of qualified manpower.According to coupled Nations Educational, Scientific and Cultural Organization (UNESCO), exoteric spen ding on higher education in India has one of the lowest public expenditure on higher education per student at US 406 dollars, which compares adversely with Malaysia (US 11,790 dollars), China (2728 dollars), Brazil (3986 dollars), Indonesia (666 dollars) and the Philippines (625 dollars). This expenditure in the USA is 9629 dollars, in the UK 8502 dollars and in japan 4830 dollars. India needs to deal with issues of both quantity and quality.In view of this shortage of public spending, parents and students are increasingly looking to private education for a solution. Every year nearly 0.4 million Indians go oversea for higher studies spending approximately $12bn. This leads to not only loss of foreign exchange, but also Brain Drain, as most of these rarely comes back to India ensuant to completing their courses. The primary reason for a large number of students seeking professional education abroad is lack of capacity in Indian Institution. There is no doubt that the state of affa irs in public universities in India is not so good. Also, with increasing enrollment in higher education, it is not probable for the government to provide higher education on its own. But, the private institutions are themselves ailing. Many dont have experience and many are trying to just grow capital without quality.ROLE OF REGULATORY BODIES AND GOVERNMENT INITIATIVES FOR PROVIDING HIGHER EDUCATIONGovernments of India has taken several rash initiatives and legislation to allow FDI in India.The outside(prenominal) Educational Institutions (Regulation of Entry and Operations) Bill, 2010 is such one initiative to regulate the entry and operation of foreign educational Institutions in India which is currently pending with parliamentary standing committee.At present India is allowing 100% FDI in higher education through automatic sector. But, still no university has established a campus here, due to a large no. of guidelines and regulation. Also, many rules are vague. Right now 106 institutions are running programmes in India with collaboration with foreign universities. But, only 2 out of 106 are canonical by AICTE (All India Council for Technical Education). Indian government does not allow foreign universities to honor any separate distributor point. It could only provide dual grade with collaboration with local institutions. Currently, many degrees given by these foreign universities are not even recognized in their own countries.The main government activity body at the tertiary level is the University Grants Commission (India), which enforces its standards, advises the government, and helps coordinate amongst the centre and the state. As of 2009, India had 20 central universities, 215 state universities, 100 deemed universities, 5 institutions established and functioning under the State Act, and 13 institutes which are of national importance. Most of these institutions are public funded. Some of these institutions have been globally applauded. Howeve r, India has failed to produce world severalize universities like Harvard, Stanford, Oxford, Cambridge or the Massachusetts Institute of technology (MIT). If The opposed Educational Institutional Bill will be passed, it will not only permit foreign universities to set-up campuses and award degrees in India, but simultaneously facilitate Indian government regulation of their operations.The purpose of the eyeshade is to regulate entry, operation and quality of education by the foreign universities. Foreign Education Institutes will have to get a deemed university status by UGC. All Foreign education institutes operating before commencement of the Act (once the Bill is passed) will have to get themselves registered and accredited within 6 months. The programs endureed in India have to be comparable to that offered in the country of origin of the Foreign Education Institutes. They will have to maintain a lower limit corpus fund of INR 100 million and Foreign Education Institutes ma y not utilize more than 75% of the income derived for the development of their institution in India and balance 25 % as corpus of fund.FEATURES OF THE FOREIGN EDUCATIONAL INSTITUTIONS standard PROPOSED LEGISLATION FOR FDINo foreign institution can provide degree to Indian student unless such institution is confirmed as Foreign Educational Provider by Indian Government.Have to maintain a fund of at to the lowest degree 500 million rupees.At least twenty years of establishment in its own country.Quality of education, curriculum, method of imparting and the faculty employed will be in accordance of rights to guidelines of UGC.Institution has to publish prospectus writing clearly about compensation structure, refund norms and amount, number of seats, condition of eligibility with min and max age, detail of faculty, process of admission, min pay payable to each category of teachers and staff, infrastructure and otherwise facilities, syllabus, rules and regulations, etc. at least s ixty day prior to date of commencement of admission.In case of violation of any guidelines a penalization of min 10 million and max 50 million rupees on with tuition fees should be refunded to the student.At max 70% of the income embossed from the fund can be utilized in the development of institution in India and rest should be added to the fund. No part could be used in any other purpose other than growth and development of the institution established by it in India.Any foreign institution not confirmed by Indian government as Foreign Education Provider which is awarding any certificate to Indian students should submit a report regarding course to the commission.GENERAL AGREEMENT ON TRADE IN SERVICES (GATS) AND HIGHER EDUCATIONBeyond the establishment of foreign universities, the bill and the government must deal with the relationship between foreign direct investment and education. In 1995, the Indian government signed the WTO treaty the universal Agreement on Trade in Servic es (GATS). The agreement aimed to give the international community access to the Indian services sector by deregulating markets. According to GATS, the private education sector qualifies as a tradable service, and therefore the Indian government is required to remove any barriers to the trade of that service. Several countries are exporting higher education and making huge profits. The unify States has shown largest trade surplus in education. The trend of treating education, particularly higher education, as a tradable commodity has affected the economy and education system of many developing countries including India.India has received desires (for opening up of services) from several countries (Australia, Brazil, Japan, unexampled Zealand, Norway, Singapore, USA) in education services in the new round of service trade negotiations launched in January 2000 (GATS 2000 round), which mostly focus on higher education, fully grown education, and other education services. All request s to India are for full market access and national treatment commitments. India has not made any proposal in education services in the GATS 2000 round due to sensitive public good nature.There was a general perception that from January 1, 2005, India is obliged under the WTO to open up its higher education sector to foreign providers and to end public subsidies, with adverse consequences for the quality and affordability of higher education. Its worth noting that India did not catalogue education services either in the Uruguay Round or in its revised commitments under the ongoing Doha Round. Hence, India has no multilateral arrangement under the WTO to open up higher education services to foreign participation. Whatever liberalization has occurred in this area, such as allowing 100% FDI on automatic route and permitting foreign participation through twinning, collaboration,franchising, and subsidiaries, has been autonomously driven. But its improbable that India will agree to suc h demands of liberalization in future.The issue and so is largely a domestic one. The impact of opening up higher education services is shaped not by the WTO but by domestic factors, including the domestic regulatory framework and the state of the domestic education system in terms of quantity, quality, costs, infrastructure and finances. In this context, evidence suggests that some of the concerns about opening up education services may not be so misplaced.NEED FOR IMPLEMENTATION OF FDI IN HIGHER EDUCATION SECTORDeveloping and transition countries are further challenged in a highly militantworld economy, because their higher education systems are not adequately developed for the creation and use of knowledge. If we look at the trouble India is facing in expansion of higher education, one may say that FDI are being acceptable just because we dont have sufficient money to spend on this area. But, the problems are others too which FDI will focus.FDI in higher education will resolve the problem of enrollment rate as we are in a situation of less supply high demand.Some new tools and techniques will be used in teaching.Indian money and talent going abroad will come in check.FDI in higher education sector will improve the Infrastructure.It major power happen that India may develop one of its own world class universities.An increase in facilities, both in terms of physical order and geographical spread, for inculcation of vocational skills backed by an increase in the general quality of higher education.India needs to fill the technological relapse as fast as it can to compete with China.The resulting competition with local universities would also induce us to become internationally competitive through quality improvements brought about by changes in curricula and other responses to an evolving market.Further, FDI in education would generate employment.Allowing FDI in education might lead to export of Indian education abroad in which there are large potentialsT here will be better scope for research as foreign universities have different methodology to run and generate revenues.India may move towards practical study based learning rather than rote learning. animated institutions need to be rebranded to overcome their poor image.NEED FOR ADDRESSING POLICY CONSTRAINTSA brief formulation of one set of policies for Indias higher education could include thefollowing components Provide public funding only for those higher education activities such as RD that have publicgoods characteristics and which would not be privately funded to the socially optimal degree. Eliminate all public support for those higher education activities the result of which hassufficient private returns to envelop the costs. image equality of opportunity and access to higher education in tell to expressed needs and demands of the population. The range of disciplines must match the range of skills undeniable and changing opportunities available in a dynamic economy. A co mpetitive market-liberal system must be allowed to operate instead of central planning. foreign EXPERIENCES IN RESPECT OF FDIInternationalization of higher education is occurring quickly through the spread of international branch campuses. Most such campuses have been established since the mid-1990s and they are concentrated in the Middle East and Southeast Asia, with growth currently occurring in India, China and Central Asia. U.S. and Australian universities have the largest number of branch campuses, with smaller numbers operated by institutions based in the United Kingdom, Malaysia and Singapore. Most are branches of universities but some are polytechnics or vocational training colleges. Singapores Ngee Ann Polytechnic, for example, is establishing a campus in Shenyang (China), primarily for Chinese students, but also for their Singaporean students to gain international experience. The Malaysian-based University College of Technology Innovation has embarked on an Indian Ocean s trategy, with overseas campuses in Colombo (Sri Lanka), Karachi (Pakistan), Panipat (India) and Perth (Australia). Some Indian institutes have also set up campuses abroad, primarily imparting education in Information Technology (NIIT, Aptech). Even developed countries are proceed with reforms in higher education. Despite the fact that the USA has the finest system of higher education in the world, it has set up a commission to ensure that America remains the worlds leader in higher education and innovation. For this purpose, the USA intends to make an investment of US $134 billion in higher education over the next ten years. Faced with deteriorating standards and low accountability in its public sector higher education, UK government has now allowed the universities to compete for students and frisson variable fees, bringing an end to the regulated fee regime in the UK. In many developing countries in Asia, (Japan, Philippines and South Korea) and Latin American (Chile, Brazil and the Dominican Republic) private higher education has become the main venue for increasing access to higher education. These countries have majority enrolment in private sector. Agarwal (2006) has discussed that two trends in higher education have been observed worldwide (i) towards transformation from elite to 9mass (or even universal) and (ii) privatization. Countries have responded to these challenges in various ways. Some examples areKOREAKorea has one of the highest gross enrolment ratios in higher education in the world with more than 80 per cent of it being in the private sector. In 1995 the Government began relaxation behavior controls since the problems from serious regulation were becoming uncontrollable. The government gave small incentive grants to reward act and introduced competition among universities and colleges by making them more autonomous and more competitive.MALAYSIAForeign Universities can set up campuses as branches by invitation. Twinning Arrangements with Universities abroad is also possible. Five foreign Universities have set up fork Campuses, namely Monash, Curtin and Swinburne Universities of Australia, SAE Institute of Australia and University of Nottingham, UK. There are17 public Universities, including 6 university colleges with enrollment of 300,000. In addition, there are 600 private institutions with similar levels of enrollment. Private institutions can be set up by Large corporations or organizations closely linked to Government (e.g. Petronas Technology University, Telekom Malaysia etc.) Large corporations that are public listed companies Political Parties (e.g. MICs TAFE College Seremban, MCAs Kolej Tunku Abdul Rahman, and UMNOs UNITAR etc.) freelance Private Colleges Local branches of Foreign UniversitiesCHINAChina is creating new universities of different kinds to supply to different needs. The government has confirmed education, science and technology to be the strategic driving forces of sustainable economic growth . It is now working towards loosening of statutory control over their higher education systems. The most novel legislation disposal FEPs in China was released in 2003. The legislation governing FEPs in China (2003) contains the following features Foreign institutions must partner with Chinese institutions Partnerships must not seek profit as their objective No less than half the members of the governing body of the institution must be Chinese citizens The post of president or the equivalent must be a Chinese citizen residing in China The basic language of instruction should be Chinese Tuition fees may not be raised without approval.However, this is not the whole story. There are a number of institutions in China (including NIIT from India), which provide education on commercial terms. Moreover, there is short-staffed data on the scale of activity of FEPs in China. There are a total of 72 joint programs that are approved by the Ministry of Education (Garrett, 2004). In addition, there are a number of other non-approved programs or those programs that are approved at other levels of government (Municipal, idyll or Local Governments). This is made amply clear by the data from the Australian Vice-Chancellors Committee (AVCC) in May 2003, which states that 27 Australian Universities offer 200 current offshore programs in China, 157 (79 percent) of which involve either Australian bachelors or masters programs. It is reasonable to assume that America, United Kingdom and other major source countries are also offering non-approved degree cookery on a similar scale. Hence the level of FEPs activity is outlying(prenominal) in excess of that reported by the Ministry of Education. It appears that the regime for FEPs is far more liberal and flexible than that indicated above.SINGAPOREThere is no regulation governing FEPs and Singapore has also not offered any